illi^ 


iiiiiii^ 


Mil- 


THE  LIBRARY 

OF 

THE  UNIVERSITY 

OF  CALIFORNIA 

LOS  ANGELES 


BOOKS  BY  FREDERIC  C  HOWE 

Denmark,     a     Cooperative     Common- 
wealth Ruled  by  Farmers 

The  High  Cost  of  Living 

Why  War 

The  Only  Possible  Peace 

Privilege  and  Democracy  in  America 

The  Modern  City  and  Its  Problems 

The  Land  and  the  Soldier 

European  Cities  at  Work 

Socialized  Germany 

The  City;  the  Hope  of  Democracy 

The  British  City,  the  Beginnings  of 
Democracy 

Wisconsin,  an  Experiment  in  Democ- 
racy 


Revolution  and  Democracy 


BY 

FREDERIC  C.  HOWE 

Author   of    The   City,    The   Hope    of  Democracy;    The   British 
City,    The    Beginnings    of   Democracy;   Privilege    and    De- 
mocracy   in   America;    JVisconsin,    An    Experiment    in 
Democracy;  Socialized   Germany;  European   Cities 
at    Work;    The    Modern    City    and    Its    Prob- 
lems;   The    Land    and   the   Soldier;    Why 
War;  The  Only  Possible  Peace;  Den- 
mark,   A     Cooperative    Common- 
wealth Ruled  by  Farmers; 
The  High  Cost  of 
Living. 


NEW  YORK 

B.  W.  HUEBSCH,  Inc. 

1921 


COPYRIGHT,    1921,    BY   B.    W.    HUEBSCH,    Inc. 
PRINTED    IN    U.    S.    A. 


CONTENTS 

CHAPTER  PAGH 

I  Labor i 

II  Coal 7 

III  Food 13 

IV  Circulation 22 

V  Land 41 

VI  Credit 52 

VII  Alien  Capitalism 63 

VIII  Opinion 70 

IX  Culture     . 79 

X  Exploiters 92 

XI  The  State 98 

XII  Politics 116 

XIII  Overhead 127 

XIV  Feudalism 144 

XV  Civilization 157 

XVI  Sabotage 171 

XVII  A  Natural  Society 182 

XVIII  Russia 189 

XIX  Freedom 196 

XX  The  First  Step 202 

XXI  Free  Communication 209 

XXII  Free  Credit 217 

XXIII  Industrial  Democracy 224 


INTRODUCTORY 

For  fifty  years  the  world  has  been  drifting  into 
the  condition  in  which  it  now  finds  itself.  The 
disordered  state  of  Europe  and  of  America  is  trace- 
able to  the  same  causes.  International  conditions 
are  a  mirror  of  domestic  conditions.  The  treaty 
of  peace  as  well  as  the  industrial  collapse  within  the 
individual  nations  is  a  product  of  an  economic  evo- 
lution which  has  resulted  in  a  privileged  society 
which  has  come  to  control  not  only  the  internal  gov- 
ernments of  the  world,  but  international  relations 
as  well. 

Fifty  years  ago  there  was  an  approach  to  equality 
of  opportunity.  Competition  was  the  prevailing 
note  in  industry.  Business  was  organized  in  small 
units.  Men  worked  willingly.  Values  were  fixed 
by  production  costs.  Nations  were  largely  self-con- 
tained. International  finance  was  limited  to  the  set- 
tlement of  trade  balances.  There  was  equal  access 
to  the  raw  materials  of  the  world.  Imperialism  was 
confined  to  a  few  subject  countries.  Freedom  was 
the  prevailing  note  in  trade,  in  commerce,  and  in 
industry.     This  was  true  not  only  in  America ;  it  was 

[vii] 


true  of  Great  Britain,  France,  and  Germany  as  well. 

A  change  began  in  the  closing  years  of  the  last 
century.  Industry  took  on  monopoly  forms.  Mo- 
nopoly interests  acquired  control  not  only  of  the 
major  industries,  but  of  raw  materials,  of  fuel,  of 
transportation,  and  of  credit.  These  same  inter- 
ests reached  out  to  control  similar  opportunities  in 
other  countries.  Protective  tariff  laws  were  enacted 
by  all  of  the  greater  powers  save  Great  Britain. 
Billions  of  dollars  were  invested  in  foreign  loans, 
in  concessions,  and  in  exploitation.  The  world  was 
parceled  out  into  spheres  of  economic  influence. 
There  was  a  rush  for  other  peoples'  lands,  for 
gold,  copper,  iron  ore,  petroleum,  rubber,  cocoa, 
timber,  and  tropical  products.  Monopoly  interests 
first  acquired  control  of  the  basic  industries  at  home, 
and  then  went  forth  with  the  aid  of  the  state  and 
international  finance,  to  acquire  similar  monopolies 
in  other  lands.  In  the  decade  before  the  war,  the 
greater  powers  of  Europe  were  in  conflict  all  over 
the  world.  The  conflict  was  economic.  It  was  also 
political.  It  was  traceable  to  the  struggle  of  mo- 
nopoly interests  to  increase  their  possessions  and 
their  power  both  at  home  and  abroad. 

During  these  years  industry  changed  in  form. 
There  was  more  or  less  complete  monopoly  in  all 
the  relations  of  life.  The  transition  took  place  in 
much  the  same  way  and  at  about  the  same  time  in 
all  of  the  greater  powers.  By  the  end  of  the  cen- 
tury monopoly  had  become  the  main  objective  of  the 

[viii] 


governing  classes  not  only  In  America,  but  In  Great 
Britain,  Germany,  France,  and  Russia  as  well. 

During  these  years  of  monopoly  conquests  and 
financial  Imperialism,  business  Interests  discovered 
that  the  road  to  economic  profit  and  power  was 
through  the  political  state.  They  discovered  that 
a  man  may  labor  for  a  lifetime  with  his  hands  or 
his  brains  and  have  no  more  at  Its  close  than  when 
he  started.  They  learned  that  wealth  created  by 
labor  never  amounts  to  a  very  substantial  sum  to 
any  man.  But  by  the  use  of  the  state,  wealth  be- 
yond measure  can  be  amassed.  And  they  have  taken 
possession  of  the  state  for  that  purpose.  They  have 
used  It  to  create  special  powers  and  privileges  of 
various  kinds.  These  privileges  enable  those  who 
possess  them  to  levy  tribute  on  every  one  else.  They 
collect  pennies,  dimes,  and  dollars  from  the  millions, 
and  by  so  doing  accumulate  millions  for  the  few. 
They  do  this  in  a  variety  of  ways,  but  chiefly  by  laws 
relating  to  a  few  fundamental  economic  processes. 
Through  these  processes  they  control  our  economic 
and  our  political  life.  And  Inasmuch  as  these  priv- 
ileges can  only  be  secured  by  first  controlling  the 
state,  they  have  acquired  control  of  the  state.  In 
fact,  they  have  become  the  state.  And  being  the 
state,  they  legislate,  first  to  create  economic  priv- 
ileges, and  then  to  protect  them  and  to  increase  the 
tribute  which  they  collect. 

While  the  people  seek  to  correct  abuses  which  be- 
[ix] 


set  them  by  condemning,  arresting,  and  seeking  to 
punish  individual  offenders,  they  permit  the  state 
itself  to  create  conditions  that  make  these  abuses  in- 
evitable. On  the  one  hand,  we  punish.  On  the 
other,  we  invite  the  offenses  of  which  we  complain 
and  give  them  the  sanction  of  legal  approval. 

The  condition  of  America  and  of  the  world  can 
only  be  understood  when  we  understand  these  ele- 
mental facts.  The  greater  powers  of  the  world  are 
ruled  by  a  class,  by  a  class  that  enjoys  power  and 
wealth  through  and  by  control  of  the  economic  state. 
They  control  the  lawmaking  agencies,  the  adminis- 
trative agencies,  and  international  relations  as  Well. 

At  the  outbreak  of  the  war  the  governing  and  the 
owning  classes  in  the  greater  powers  were  substan- 
tially the  same.  They  owned  the  same  things;  they 
had  the  same  interests  and  the  same  point  of  view. 
They  shaped  the  psychology  and  the  policy  of  their 
governments  to  the  same  ends.  Financial  capital- 
ism replaced  landlordism  in  political  power.  In  Eu- 
rope the  financial  and  the  landed  classes  were  merged 
into  a  ruling  group.  They  controlled  the  state,  not 
only  to  protect  the  privileges  they  had  secured  at 
home,  but  to  extend  their  power  through  imperial- 
ism over  the  outside  world. 

The  war  enthroned  the  profit-taking,  privileged, 
imperialistic  groups.  They  found  they  possessed  a 
power  they  had  never  fully  realized,  and  they  used 
it  as  they  had  never  dared  to  use  it  before.     They 


were  astonished  at  the  profits  to  be  made  through 
the  state.  The  necessities  of  the  war  and  the  ab- 
sorption of  the  people  in  patriotic  endeavor  enabled 
them  to  cement  their  power  still  further.  The  eco- 
nomic state  and  the  political  state  were  so  merged 
that  they  could  hardly  be  distinguished.  The  ruling 
economic  group  became  the  ruling  political  group. 
Privilege  identified  the  state  with  itself.  It  was  will- 
ing to  send  the  state  to  war  to  protect  its  imperial- 
istic privileges.  It  was  willing  to  sacrifice  the  state 
in  the  midst  of  war  for  the  protection  of  these  priv- 
ileges. It  took  unparalleled  profits  while  men  were 
dying  by  the  millions.  It  pledged  itself  to  the  free- 
dom of  the  world  while  it  made  secret  pacts  to  hold 
the  world  in  serfdom. 

This  was  the  condition  of  the  world  at  the  end 
of  the  great  war.  The  Allied  powers  had  called 
mankind  to  arms  to  free  the  world  from  force  and 
from  economic  privilege.  But  the  peace  which  has 
been  given  us  enthroned  force  and  sanctioned  eco- 
nomic privilege  as  it  was  never  sanctioned  before. 
The  peace  was  not  made  by  Lloyd  George,  by  Clem- 
enceau,  by  Orlando.  The  peace  was  the  inevitable 
result  of  the  ascendancy  of  economic  groups  in  the 
victorious  powers  who  owned  or  represented  priv- 
ileges which  they  sought  to  have  sanctioned  by  the 
peace  conference.  The  belief  that  President  Wil- 
son could  have  controlled  these  groups  or  interests 
was  so  fatuous  a  stand  that  any  one  familiar  with  the 

[xi] 


governments  of  Europe  should  have  known  it.  That 
Lloyd  George,  Clemenceau,  or  Orlando  could  have 
made  a  peace  based  on  the  principles  of  freedom 
laid  down  by  President  Wilson  was  equally  fatuous. 
The  governing  groups,  the  parliaments,  and  the  min- 
istries of  the  Allied  powers  would  not  have  toler- 
ated a  ministry  or  a  peace  that  failed  to  protect  the 
privileges  that  the  governing  classes  In  these  coun- 
tries owned  and  had  struggled  for  years  to  secure 
at  home  and  abroad. 

The  peace  treaty  was  not  given  us  by  wicked  men. 
It  was  not  a  personal  betrayal  of  promises  or  guar- 
antees. It  was  a  peace  that  Is  perfectly  responsive 
to  the  will  of  the  groups  and  classes  that  control  their 
respective  governments.  The  peace  was  not  made 
by  peoples.  It  was  not  made  by  individual  men. 
It  was  made  by  iron,  by  coal,  by  oil,  by  tropical  re- 
sources, by  trade  privileges,  and  by  those  economic 
forces  which  had  come  to  control  the  domestic  life 
of  the  Powers,  Allied  as  well  as  Central.  The 
treaty  of  peace  was  the  last  word  of  capitalism;  of 
a  capitalism  that  had  become  a  system  of  world  im- 
periahsm. 

The  capitalistic  world  is  now  in  a  state  of  col- 
lapse. The  economic  state  is  being  strangled  by 
privilege.  The  profit-making  motive  has  been  car- 
ried so  far  that  the  world  is  deadlocked.  The  do- 
mestic life   of   the   greater   powers   is   deadlocked. 

[xii] 


Class  laws  have  made  it  difficult  if  not  impossible 
for  the  world  to  function.  And  to  protect  the  priv- 
ileges and  sustain  the  imperialistic  peace  that  has 
been  imposed  on  the  world,  the  class  ruled  states 
resort  again  to  force  to  suppress  any  effective  pro- 
test. They  continue  to  arm  and  equip  themselves, 
not  from  fear  of  one  another,  but  from  the  fact  that 
when  a  ruling  class  reaches  a  certain  pinnacle  of  priv- 
ileged power,  it  turns  instinctively  to  force  because 
of  the  insecurity  of  its  possessions.  Great  Britain 
is  exhausting  herself  in  Mesopotamia,  in  Ireland,  in 
India,  in  Turlcey,  not  because  Great  Britain  has  any- 
thing to  fear  from  a  free  world,  but  because  the 
privileged  classes  are  blinded  by  apprehension. 
They  may  even  destroy  the  state  in  their  efforts  to 
protect  their  privileges.  It  is  not  fear  of  Germany 
alone  that  leads  France  to  exhaust  herself  in  Syria, 
in  South  Africa,  or  in  Poland,  or  even  in  maintain- 
ing a  cordon  sanitaire  about  Germany.  It  is  rather 
fear  for  her  far-flung  investments  that  are  inter- 
woven with  the  peasants  and  the  exploiting  banks  in 
Paris,  which  in  turn  are  so  powerful  with  the  govern- 
ment that  they  shape  and  mold  the  foreign  policy 
of  the  country. 

Germany  is  being  strangled  by  the  terms  of  the 
peace.  Austria  is  dying  by  virtue  of  the  fact  that 
her  resources  have  been  tal^en  from  her  and  she  has 
been  isolated  from  the  outside  world.  Hungary  is 
in  but  little  better  phght.     Poland  has  been  driven 

[xiii] 


to  make  war  for  imperialistic  conquest  at  the  in- 
stance of  the  Allied  powers;  while  Russia  has  been 
subjected  to  an  embargo,  partly  through  fear  of  her 
ideals  and  partly  to  coerce  her  to  pay  her  indebted- 
ness to  France.  Nearly  300,000,000  of  the  500,- 
000,000  people  in  Europe  have  been  tied  hand  and 
foot  by  the  AUied  powers.  They  have  been  tied  by 
a  privileged  peace  drafted  not  by  the  peoples  of 
these  countries  but  by  the  representatives  of  priv- 
ileged interests  in  these  countries. 

The  same  blind  instinct  for  privilege  at  home  led 
to  the  erection  of  protective  tariffs  at  a  time  when 
the  world  needs  freedom  of  communication  more 
than  anything  else.  That  is  the  only  way  to  bring 
the  world  back  to  life.  The  world  needs  a  fair  dis- 
tribution of  shipping,  of  raw  materials,  of  coal,  iron 
ore,  copper,  lumber,  and  other  essentials  of  industry. 
The  great  need  of  France  is  to  permit  Germany  to 
rise  from  the  ashes.  But  Germany  can  only  rise 
when  the  amount  of  the  indemnity  is  fixed;  when  she 
has  access  to  coal  and  to  iron,  to  copper  and  to  oil; 
when  she  dares  to  build  locomotives,  ships,  and 
means  of  transport  with  the  assurance  that  they  will 
not  be  seized  by  France.  Great  Britain  in  turn  needs 
that  France  should  release  Germany  so  that  Ger- 
many can  again  become  a  customer  of  England;  so 
that  German  factories  can  produce  the  goods  to 
clothe  and  feed  and  give  work  to  67,000,000  peo- 
ple. Until  the  terms  of  peace  are  redrawn  along 
the  lines  of  freedom,  until  the  economic  obstacles 

[xiv] 


that  have  been  imposed  on  the  world  are  razed,  it 
will  not  be  possible  for  the  world  to  go  on.  It  will 
not  be  possible  for  the  nations  of  Europe  to  produce. 
It  will  not  be  possible  for  them  to  establish  a  stable 
ratio  of  exchange.  It  will  not  be  possible  for  them 
to  retire  their  paper  money  or  raise  the  value  of 
their  securities  so  that  they  will  be  acceptable  to 
investors  either  at  home  or  abroad. 

The  same  privileged  classes  are  ascendant  in  the 
United  States.  They  too  are  contributing  to  the 
death  of  the  world.  We  have  loaned  something 
less  than  $15,000,000,000  in  some  form  or  other  to 
the  countries  of  the  world.  They  owe  us  interest. 
They  owe  us  the  principal.  They  can  only  pay  in 
one  of  three  ways :  in  gold,  of  which  they  have  little 
or  none;  in  bonds  or  paper  money,  which  have  a 
depreciated  value;  or  in  commodities.  If  they  are 
permitted  to  pay  in  commodities,  exchange  would  re- 
establish itself.  The  value  of  the  securities  which 
we  hold  would  be  increased.  Trade  would  revive, 
as  would  all  industry.  Europe  would  then  buy  our 
iron,  our  cotton,  and  our  wool.  Europe  would  buy 
our  foodstuffs  which  lie  hoarded  or  rotting  in  the 
West.  But  the  United  States,  like  Europe,  has 
adopted  a  policy  of  economic  isolation.  We  refuse 
to  buy  from  other  countries.  We  have  determined 
that  Europe  shall  not  pay  us  in  the  only  thing  that 
has  any  value  to  us.  We  insist  on  selling,  but  re- 
fuse to  buy.     And  the  incoming  administration  is 

[xv] 


pledged  to  raise  the  prohibition  against  foreign  im- 
ports still  higher. 

The  United  States  has  added  its  weight  to  the 
destructive  embargo  on  the  life  of  the  world.  We 
too  are  destroying  ourselves,  as  France  and  Great 
Britain  are  destroying  themselves.  We  want  our 
cake  and  want  to  eat  it.  It  cannot  be  done.  Not 
only  will  Europe  go  bankrupt  in  this  destructive 
process,  but  we  too  will  drift  in  the  same  direction. 

To  use  a  term  that  has  been  applied  solely  to 
labor,  the  economic  life  of  the  world  is  being  de- 
stroyed by  sabotage.  Through  sabotage  capitalism 
is  destroying  itself.  It  is  making  it  impossible  for 
the  interdependent  world  to  go  on.  The  same 
thing  happened  in  a  somewhat  different  way  after 
the  wars  of  Rome  and  Carthage.  Carthage  never 
recovered.  Rome  went  into  decline.  Rome  de- 
stroyed her  freeman  farm  owners  through  land  mo- 
nopoly, through  usury,  and  through  the  importation 
of  slaves  to  cultivate  her  fields.  This  was  made 
possible  by  the  tribute  which  Rome  collected  from 
conquered  lands;  a  tribute  not  very  different  from 
the  tribute  America  took  from  the  nations  of  Eu- 
rope in  the  form  of  war  profits,  which  profits  en- 
throned in  power  the  profit-making  class  that  now 
uses  the  government  to  give  permanence  and  pro- 
tection to  privileges  and  profits  which  the  war  made 
possible. 

The  sickness  of  society  will  not  be  cured  by  slight 
[xvl] 


modifications  in  the  treaty  of  peace.  It  will  not  be 
materially  helped  by  disarmament  or  by  a  reduction 
of  the  burdens  of  taxation.  The  world  will  only 
come  back  to  life  when  it  produces  freely,  when  it 
communicates  freely,  when  it  exchanges  freely.  And 
it  cannot  do  these  things  under  the  restrictive,  priv- 
ileged peace  imposed  upon  it  at  Versailles.  The 
victors  are  suffering  with  the  vanquished.  There 
must  be  a  new  renunciation  of  privileges,  or  there 
will  be  something  like  a  revolution  that  will  destroy 
the  privileges  that  those  who  possess  them  will  not 
themselves  voluntarily  relinquish.  Explanations 
that  blink  the  fact  that  the  world  is  tied  like  Gulliver 
by  a  thousand  thongs  explain  only  the  superficial 
facts.  The  truth  is  that  the  life  of  the  world  is  being 
strangled  by  a  privileged  group  of  men  possessed  of 
national  and  imperialistic  grants  and  interests,  which 
they  have  sought  to  make  inviolate  through  the 
treaty  of  peace.  It  is  these  interests  that  have  in- 
sisted on  the  destructive  indemnity  from  Germany; 
that  sought  control  of  the  eastern  Mediterranean 
and  of  Africa.  It  is  these  interests  that  seized  on 
Mesopotamia  and  the  Mesopotamian  oil  fields,  and 
on  similar  resources  in  South  Russia.  It  was  they 
that  divided  South  Africa.  They  stripped  Germany 
and  embargoed  Russia. 

Sabotage  is  the  most  pervasive  thing  in  the  society 
in  which  we  live.  It  is  present  in  almost  every  in- 
dustry and  in  every  profit-making  service.     It  is  the 

[xvii] 


controlling  motive  of  our  major  industries.  It  is 
dominant  in  domestic  as  it  is  in  international  affairs. 
President  Wilson  laid  down  a  program  of  freedom 
such  as  Jefferson,  as  Lincoln,  as  Cobden  might  have 
urged.  It  was  hailed  by  the  whole  unprivileged 
world.  But  the  peace  that  emerged  was  a  peace  of 
sabotage.  It  was  a  peace  dictated  by  the  desire  to 
control  industry;  to  control  transportation;  to  con- 
trol raw  materials,  to  control  fuel,  to  control  bank- 
ing. The  peace  of  Versailles  was  the  final  step  in 
the  evolution  that  began  about  the  middle  of  the  last 
century,  and  which  has  continued  uninterrupted  ever 
since.  Monopoly  first  rose  to  power  at  home.  It 
then  reached  out  for  imperialistic  possessions  in 
other  lands.  It  used  the  government  to  protect  its 
imperialistic  concessions.  War  came  as  a  result  of 
a  conflict  of  imperialistic  interests.  And  the  peace 
that  was  given  us  is  a  peace  that  sanctions  imperial- 
ism and  aims  to  protect  from  interference  the  im- 
perialistic division  of  the  world. 

Occasional  men  like  Anatole  France  have  told  us 
that  Europe  is  dying.  Europe  is  dying.  Austria 
is  dying,  Poland  is  dying.  Germany  is  dying. 
And  because  of  the  death  sentence  imposed  on  these 
countries.  Great  Britain,  France,  and  Italy  are  dying 
as  well.  Russia  refuses  to  die.  She  refuses  to  be 
sabotaged  by  the  Old  Regime,  by  the  old  inefficiency, 
by  debt  and  taxation  to  pay  for  the  wastage  of  priv- 
ileged rule.     Russia  prefers  to  die,  if  she  is  to  die,  by 

[xviii] 


disorders,  by  revolutions,  by  giving  the  natural  eco- 
nomic instincts  of  the  people  a  chance  to  play.  Un- 
happily Russia  too  is  sabotaging.  She  is  sabotaging 
freedom.  If  this  is  a  permanent  policy  of  commun- 
ism, Russia  too  will  pay  the  cost  of  its  suppression 
of  freedom.  But  if  this  is  merely  a  transition  stage 
made  necessary  or  deemed  necessary  by  counter- 
revolutions, by  the  imperialistic  assaults  of  the 
greater  powers,  by  the  necessity  of  securing  some 
kind  of  stability,  which  is  to  be  changed  when  se- 
curity is  obtained,  then  we  may  see  in  Russia  a  new 
kind  of  a  state,  a  state  in  which  the  natural  instincts 
and  powers  of  the  people  are  given  an  opportunity 
to  play  as  they  have  never  been  permitted  to  play  in 
the  history  of  the  world.  For  freedom  is  the  only 
way  out  of  the  economic  impasse  which  is  blocking 
the  recovery  of  a  world  already  all  but  destroyed 
by  war. 


[xix] 


CHAPTER  I 

LABOR 

Sabotage  is  new  in  America.  Up  to  recently  men 
worked  willingly.  They  expected  to  rise  in  the 
world  and  themselves  become  employers.  They 
were  moved  by  hope;  they  were  inspired  by  the  suc- 
cess of  their  fellows  who  had  risen  from  the  bench 
or  the  forge.  Within  the  last  few  years,  however, 
and  especially  since  the  war,  a  change  has  come  over 
the  worker.  Labor,  it  is  claimed,  is  slowing  down. 
Production  is  being  checked.  The  worker  is  tak- 
ing advantage  of  his  power.  This  complaint  comes 
from  all  over  the  country.  It  is  claimed  that  Amer- 
ica is  not  producing  to  anything  like  its  capacity. 
Something  very  like  sabotage  is  creeping  into  our 
industrial  processes. 

_In  the  fall  of  19 19,  the  shoe  manufacturers  of 
Massachusetts  brought  suit  against  their  employees, 
on  the  ground  that  they  were  loafing  on  their  jobs. 
The  men  had  demanded  an  increase  in  wages  before 
a  wages  contract  had  expired.  The  employers  de- 
chned  to  meet  this  demand.     Instead  of  striking, 

[I] 


the  men  reduced  their  output.  They  slowed  down 
their  efforts.  There  was  a  silent  strike.  To  meet 
this  condition  the  employers  applied  for  an  injunction 
to  compel  the  men  to  increase  the  output. 

Similar  complaints  are  heard  of  the  printers  and 
pressmen  of  New  York,  of  the  miners  and  steel 
workers  in  the  Pittsburgh  and  Chicago  districts.  It 
is  heard  from  the  lumber  mills  of  the  Northwest. 
Suggestions  of  labor  sabotage  have  become  so  gen- 
eral as  to  constitute  a  grievance.  Men  are  getting 
higher  nominal  wages  than  they  ever  received  before. 
Prohibition  has  reduced  labor  waste  and  increased 
the  efficiency  of  men.  The  eight-hour  day  has  be- 
come the  standard  of  a  day's  labor.  Men  should 
work  more  willingly  and  produce  more  than  in  the 
past.  The  employer  says  that  the  reverse  is  true. 
Men  work  with  deliberation.  Their  tools  are  not 
in  place.  Materials  are  not  satisfactory.  Some- 
times there  is  an  unaccounted  breakdown  in  the 
machine. 

In  December  last,  the  New  York  Sun  ^  made  an  in- 
vestigation of  complaints  of  labor  conditions  in  dif- 
ferent parts  of  the  country.  It  reached  the  conclu- 
sion that  in  many  industries  men  were  not  working 
as  they  had  in  the  past,  and  that  in  consequence  the 
output  per  man  was  reduced  In  some  sections  by 
from  15  to  50  per  cent.  An  investigation  by  the 
Research  Department  of  the  National  Association 
of  Credit  Men  estimates  the  average  ratio  of  labor 

1  Issue  of  December  1,  1919. 


efficiency  at  73  per  cent,  and  an  enquiry  by  the  New 
York  World  placed  it  at  75  per  cent. 

The  employers  treat  the  evil  as  though  it  were 
personal  and  could  be  corrected  by  the  injunction  or 
by  some  kind  of  force.  But  employers  are  not  in  a 
position  to  complain.  They  too  limit  production. 
They  reduce  output  to  keep  up  prices.  Monopoly 
profits  come  from  restricted  production.  Profits 
would  be  reduced  by  working  to  capacity,  by  the  oper- 
ation of  the  natural  laws  of  demand  and  supply. 

THE    NEW   PSYCHOLOGY 

jLabor  has  adopted  the  rules  that  prevail  in  in- 
dustry. Labor  is  able  to  use  these  rules  because  of 
the  shortage  of  workers.  For  the  first  time  in  his- 
tory, labor  enjoys  a  quasi-monopoly.  This  is  one 
explanation  of  labor  slacking.  But  there  is  a 
deeper  reason.  It  is  psychological.  The  human 
element  in  industry  is  divorced  from  interest  in  the 
quantity  or  the  quality  of  output.  Men  have  no 
part  in  the  management.  They  do  not  share  in  the 
profits.  Their  return  is  fixed  by  the  wage  scale.  It 
is  measured  in  the  pay  envelope  at  the  end  of  the 
week.  The  worker  has  little  contact  with  the  em- 
ployer. He  has  become  a  number,  a  brass  check. 
He  no  longer  owns  his  tools.  He  performs  possibly 
a  single  function.  He  attaches  a  nut  to  a  machine. 
Why  should  he  produce  more  than  he  has  to  ?  Why 
should  he  be  concerned  over  the  volume  or  the  qual- 
ity of  the  output? 

[3] 


Moreover,  the  interest  of  labor  is  opposed  to 
quantity  production.  The  less  effort  the  worker 
makes,  the  longer  the  job  will  continue.  The  work- 
man who  works  to  capacity  is  working  against  his 
own  interest.  He  may  terminate  his  own  employ- 
ment. He  may  increase  the  number  of  men  out  of  a 
job.  And  the  man  out  of  a  job  is  a  standing  menace 
to  the  man  who  has  a  job. 

Labor  also  is  treated  as  a  commodity.  It  is 
bought  in  the  lowest  market.  It  sells  in  the  highest 
market.  Being  merely  a  commodity,  it  sells  as  little 
as  possible  and  gets  as  much  as  possible.  This  is 
good  business.  Labor  is  learning  to  drive  a  busi- 
ness bargain  in  the  business  world.  Capital  should 
not  complain,  for  capital  treats  labor  as  a  commodity. 
That  is  one  of  labor's  complaints.  Nor  has  society 
a  right  to  complain.  For  society  has  created  an  in- 
dustrial system  in  which  the  worker  has  no  share  in 
the  management  and  enjoys  no  return  from  increased 
effort. 

COST   TO    SOCIETY 

There  is  no  doubt  but  that  the  wages  relationship 
is  not  working  well.  Labor  is  taking  advantage  of 
the  shortage  of  workers.  In  some  industries  it  is 
making  silent  war  on  the  employer.  But  labor  is 
not  striking  against  the  employer  alone.  For  the 
employer  shifts  the  cost  to  the  public.  Labor  is 
striking  against  society.     For  society  wants  wealth. 

[4] 


It  wants  food,  coal,  lumber,  machinery,  clothes, 
shoes,  and  commodities  of  all  kinds. 

Sabotage  is  the  result  of  the  passing  of  the  old 
hopes  and  ambitions  and  the  definite  establishment 
of  the  wages  system.  We  may  protest  against  it; 
employers  may  seek  mandatory  injunctions;  the 
courts  may  jail  the  agitator  and  make  strikes  illegal 
—  society  may  do  all  of  these  things,  but  sabotage 
will  not  be  ended  by  force.  It  will  not  be  ended  by 
the  injunction.  Nor  will  moral  appeal  have  any  ef- 
fect). We  can  only  end  sabotage  by  changing  men's 
relation  to  their  employment,  and  we  can  only  do  this 
by  the  creation  of  psychological  forces  that  will  auto- 
matically impel  men  to  produce  willingly  and  to  en- 
joy their  work  as  well.  There  is  no  other  way  save 
force  or  hunger  to  call  forth  the  efforts  of  men  and 
these  forces  cannot  now  be  applied.  Sabotage,  with- 
holding efficiency,  slacking,  the  silent  strike  these 
tendencies  are  likely  to  continue  under  an  industrial 
system  in  which  the  worker  has  no  interest  in  his 
work. 

The  wages  system  seems  to  have  reached  its  logical 
conclusion.  It  will  linger  for  a  long  time,  but  as  a 
system  of  industry  it  has  lost  its  vitality.  It  no 
longer  satisfies  men.  This  is  the  meaning  of  the 
spirit  of  industrial  unrest  not  only  in  America,  but 
in  Europe  as  well.  \ 

This  is  the  opinion  of  Mr.  Fred  J.  Miller,  Presi- 
dent of  the  American  Society  of  Mechanical  Engi- 
neers, who  says : 

[5] 


"  Our  industrial  problems  of  to-day  follow  from 
the  fact  that  the  relations  of  employer  and  employee 
are  still  based  on  the  old  ideas  of  slavery  and  of 
the  patriarchal  system.  We  still  believe  that  the 
workman  ought  to  be  grateful  to  the  employer  for 
having  employment.  We  still  consciously  or  uncon- 
sciously regard  the  workman  as  somehow  inferior  or 
of  less  importance  than  the  employer. 

"  As  long  as  management  is  based  upon  such  ideas, 
there  will  be  no  end  to  our  industrial  difficulties.  It 
is  the  common  thing  to-day  to  jump  on  the  workers 
and  to  denounce  them  indiscriminately  for  restricting 
production.  But  it  is  equally  true  that  a  restriction 
of  production  is  carried  on  by  employers  on  a  large 
scale.  It  is  notorious  that  in  the  anthracite  coal 
industry,  both  employers  and  workers  have  for  years 
restricted  production  by  strikes,  lockouts,  and  in 
other  ways.  It  is  futile  to  ascribe  all  our  ailments 
to  *  wicked  workers.'  If  there  are  wicked  workers, 
then  there  are  also  wicked  employers,  and  the  im- 
portant thing  to  remember  is  that  the  common  run 
of  humanity  is  the  same  throughout  all  industries 
and  in  all  conditions  of  society." 

The  industrial  system,  not  the  individual  employer, 
not  the  wage  earner,  is  at  fault. 


[6] 


CHAPTER  II 

COAL 

The  bituminous  coal  miners  went  on  strike  in  1919 
for  a  six-hour  day  and  a  thirty-hour  week.  This 
seemed  an  unreasonable  request.  It  was  resented 
by  the  public.  The  operators  said  the  men  wanted 
more  pay  and  shorter  hours.  But  the  men  replied 
that  they  wanted  to  work  more  hours  than  the  coal 
operators  permitted  them  to  work.  The  miners 
claimed  they  were  employed  less  than  thirty  hours  a 
week;  that  the  mines  are  idle  a  great  part  of  the 
time  in  order  that  the  operators  might  charge  a 
higher  price  for  the  output.  This  contention  is  sup- 
ported by  the  United  States  Geological  Survey,  which 
shows  that  out  of  a  total  possible  working  days  of 
304,  the  men  worked  from  195  days,  in  19 14,  to  299 
days  in  19 1 8.  In  19 16  the  miners  worked  198  days 
in  Illinois,  187  days  in  Indiana,  and  197  days  in 
Ohio.  Since  the  armistice  the  average  hours  of 
work  have  been  cut  to  62.5  per  cent.,  or  to  30  hours 
out  of  a  possible  48  hours  a  week.  While  this  is 
true  the  country  is  paying  monopoly  prices  for  coal, 
and  is  periodically  confronted  with  a  fuel  shortage. 
No  one  doubts  that  our  coal  supply  is  adequate 
[7] 


for  every  need.  There  should  be  no  fuel  shortage 
in  any  part  of  the  country.  Anthracite  and  bitumin- 
ous coal  is  deposited  in  abundance  from  the  Atlantic 
to  the  Pacific.  It  is  found  in  Pennsylvania,  Ohio, 
West  Virginia,  Tennessee,  Indiana,  Illinois,  Color- 
ado, and  Wyoming.  A  coal  famine  would  be  easily 
avoided  if  coal  mining  were  intelligently  organized. 
And  coal  could  be  sold  far  below  its  present  cost  — 
a  cost  fixed  by  monopoly  control  of  the  basic  Indus- 
try of  the  country. 

COAL    PROFITS 

] — 

I  Coal  operators,  like  labor,  are  unwilling  to  pro- 
duce to  capacity.  Capacity  production  means  com- 
petition. Competition  brings  down  prices  to  the  con- 
sumer. It  reduces  profits.  Under  competitive  con- 
ditions coal  would  sell  at  cost,  plus  a  reasonable  re- 
turn on  capital.  A  few  years  ago  bituminous  coal 
sold  at  from  $i  to  $3  a  ton,  where  it  is  now  selling 
at  from  $5  to  $20  a  ton.  The  labor  cost  of  produc- 
tion is  reported  at  below  $1.40  a  ton.  A  recent  re- 
port of  the  Federal  Trade  Commission  Indicates  the 
exorbitant  profits  of  the  bituminous  mine  operators. 
So  does  a  recent  statement  of  Mr.  W.  G.  McAdoo, 
who  says  that  profits  ran  as  high  as  200  per  cent, 
during  the  war.  In  some  cases  they  were  as  high  as 
1000  per  cent.  According  to  the  report  of  the  Fed- 
eral Trade  Commission  on  the  bituminous  coal  min- 
ing Industry  of  western  Pennsylvania,  the  operators 
kept  only  6  cents  out  of  every  dollar  In  19 16,  whereas 

[8] 


in  19 19  they  kept  23  cents  out  of  every  dollar,  or 
an  increase  of  nearly  400  per  cent.  Official  investi- 
gations of  over  400  coal  companies  disclosed  that 
they  earned  dividends  in  excess  of  their  total  capital- 
ization, real  and  fictitious,  during  the  war. 

The  coal  operators,  like  the  workers,  sabotage 
production.  In  so  doing  they  sabotage  society. 
They  sabotage  all  industry  as  they  do  the  individual 
consumer. 

The  mine  owners  say  the  blame  should  not  all 
be  laid  at  their  door.  They  protest  that  their  out- 
put is  fixed  by  their  ability  to  secure  cars.  They 
can  only  mine  coal  if  they  can  carry  it  to  market. 
They  can  only  employ  their  men  62  per  cent,  of  the 
time,  they  claim,  because  of  the  refusal  of  the  rail- 
roads to  haul  their  product. 

ECONOMIC    MOTIVE    FOR    SCARCITY    PRODUCTION 

\  It  is  to  the  interest  of  the  railroad  owners,  as  it 
is  to  the  interest  of  mine  operators,  to  suppress  com- 
petition and  limit  production.  Railroad  stock- 
holders are  owners  of  coal  mines.  They  own  96  per 
cent,  of  the  anthracite  coal  of  Pennsylvania.  They 
own  a  great  part  of  the  bituminous  coal  all  over 
the  country.  Even  though  the  law  forbids  direct 
ownership  by  the  railroads,  ownership  is  lodged  in 
corporations  made  up  of  the  directors  and  stock- 
holders of  the  railroads.  And  the  railroad  stock- 
holders give  their  own  coal  the  preference.  They 
discriminate    against    competitors.     They    do    not 

[9] 


make  prompt  deliveries.  They  often  deny  coal  cars 
altogether.  It  was  by  these  means  that  the  inde- 
pendent coal  operators  of  Pennsylvania  were  crushed 
out.  One  after  another  was  driven  out  of  business 
or  acquired  by  the  anthracite  coal  roads.  The  bit- 
uminous coal  supply  has  been  monopolized  in  the 
same  way. 

The  railroads,  like  the  mine  operators,  are  inter- 
ested in  a  coal  shortage.  They  are  interested  in 
suppressing  free  production.  In  the  process,  they 
sabotage  industry  and  society  as  well. 

Railway  directors  often  make  more  money  out  of 
coal  than  they  do  out  of  hauling  freight.  Freight 
rates  are  fixed  by  the  Interstate  Commerce  Commis- 
sion. The  law  declares  they  should  be  fixed  at  a 
reasonable  figure.  The  price  of  coal  is  not.  The 
capital  stock  of  the  railroads  is  widely  held.  Not 
so  with  the  coal  mines.  The  railroad  mines  are 
owned  largely  by  the  directors  and  stockholders  of 
railroads,  who  have  capitalized  them  far  above  their 
purchase  price,  and  who  make  more  money  out  of 
the  sale  of  coal  than  they  do  out  of  their  small  hold- 
ings in  the  railroads.  It  is  thus  to  their  interest  to 
block  the  free  production  of  fuel,  for  the  free  pro- 
duction of  fuel  interferes  with  the  monopoly  prices 
which  they  enjoy. 

SCARCITY    PHILOSOPHY 

Scarcity,  not  plenty,  is  the  rule  not  only  of  coal  but 
of  all  basic  industries.     Withholding  production  is 

[10] 


becoming  the  rule  of  modern  industry.  It  Is  becom- 
ing the  rule  of  our  economic  life.  It  is  true  of  al- 
most all  industries  that  enjoy  a  monopoly;  it  is  es- 
pecially true  as  to  raw  materials,  iron  ore,  coal, 
lumber,  copper,  and  oil. 

Speaking  on  this  subject,  Mr.  Walter  N.  Polakov, 
a  well  known  consulting  engineer,  said: 

"  The  current  talk  about  efficiency  and  increased 
production  is  misleading.  As  a  matter  of  fact,  in- 
creased production  in  the  aggregate  is  not  desired. 
It  would  lead  to  a  fall  in  prices  which  would  cut 
heavily  into  profits.  This  is  the  last  thing  those 
who  are  in  control  of  industry  wish. 

"  The  trouble  arises  from  the  fact  that  a  shortage 
of  commodities  means  higher  prices  and  that  higher 
prices  is  what  our  manufacturers  and  merchants 
want.  The  talk  about  increased  production  is  a  re- 
sult of  a  confusion  of  ideas.  What  each  owner  of 
an  industrial  plant  wants  is  an  increase  in  produc- 
tion in  a  particular  plant,  as  against  every  other 
plant.  But  even  this  desire  is  thwarted  by  a  knowl- 
edge that  inefficiencies  in  management  which  lead 
to  decreased  production  will  be  paid  for  by  the  con- 
sumer in  higher  prices.  That  is  why,  regardless  of 
all  the  talk  about  efficiency,  we  find  employers  un- 
willing to  introduce  new  methods  of  organization, 
which  mean  increased  production." 

The  sabotage  of  which  we  complain  by  labor  is  not 
confined  to  labor.  Scarcity  philosophy  had  its  origin 
in   the   protective    tariff.     It   inspired   the    organi- 

["] 


zation  of  the  trust.  It  is  the  underlying  motive  of 
all  monopoly.  Scarcity,  not  plenty;  dearness,  not 
cheapness,  has  become  the  accepted  economic  phil- 
osophy of  American  industry. 


[12] 


CHAPTER  III 

FOOD 

The  production  and  distribution  of  food  is  univer- 
sally sabotaged.  This  explains  the  high  cost  of  liv- 
ing in  America  where  food  should  be  both  cheap 
and  plentiful.  Up  to  a  generation  ago  food  was 
produced  and  distributed  freely  from  the  farm  to 
the  consumer.  There  were  few  intermediaries  in  its 
handling  and  the  railways  cooperated  willingly  in  de- 
veloping local  production. 

It  is  not  possible  to  control  the  production  of  food 
at  the  source  as  is  done  with  coal,  lumber  and  mineral 
products.  Food  is  sabotaged  after  production.  It 
is  not  permitted  to  reach  the  consumer.  Often  it 
is  not  permitted  to  leave  the  farm.  The  labor  and 
capital  which  have  gone  into  its  production  are  lost 
to  the  farmer  and  to  society  as  well. 

EARLY    CONDITIONS    IN   AGRICULTURE 

A  generation  ago  the  farmer  produced  for  a  local 
market.  He  sold  his  produce  in  the  near-by  town. 
He  bartered  at  the  general  store.     He  slaughtered 

[13] 


his  cattle  on  the  farm  or  in  the  near-by  slaughter- 
house. He  was  largely  self-contained.  Agriculture 
was  diversified.  The  farmer  raised  cattle,  hogs, 
sheep  and  poultry.  This  enriched  the  soil  and  main- 
tained its  productive  power.  There  were  few  if 
any  middlemen  between  the  farmer  and  the  ultimate 
consumer.  The  prices  of  food  products  —  meat, 
flour,  butter,  eggs  and  milk.  —  were  determined  by 
competition,  by  quantity  production  and  by  quantity 
consumption.  Food  was  cheap  and  plentiful  up  to 
a  few  years  ago  when  the  speculators  began  to  con- 
trol the  supply. 

This  is  the  condition  of  food  marketing  in  Europe 
to-day.  The  city  is  fed  by  the  surrounding  country. 
Great  central  markets  are  maintained  by  the  cities, 
into  which  the  farmer  brings  his  produce  for  direct 
sale  to  the  retail  dealer.  In  Germany,  France,  Italy, 
Belgium  and  Denmark,  every  town  has  its  own 
slaughter-house.  These  stimulate  the  raising  of 
cattle  in  the  surrounding  country.  The  cattle  are 
killed  in  the  municipal  slaughter-house  and  the  local 
butcher  buys  from  the  producer  direct.  There  are 
over  a  thousand  municipally  owned  slaughter-houses 
in  Germany  alone.  There  are  44  cooperative 
slaughter-houses  in  little  Denmark.  All  of  the  coun- 
tries in  Europe  require  that  slaughtering  be  done  in 
public  abattoirs  or  in  abattoirs  controlled  by  cooper- 
ative socieites.  This  was  the  condition  in  America 
up  to  the  advent  of  the  packing  trust.  The  packers 
of    Chicago    destroyed    the    local    slaughter-house. 

[14] 


They  did  this  in  a  variety  of  ways,  usually  by  unfair 
competition. 

FOOD   SPECULATION 

America,  which  should  be  the  cheapest  country  in 
the  world  in  which  to  live,  is  possibly  the  most  ex- 
pensive. American  grown  foodstuffs  sell  at  a  lower 
price  in  Europe  than  they  do  at  home.  Many 
staple  articles  sell  at  the  same  price  at  the  point  of 
production  that  they  do  a  thousand  miles  distant. 
The  cost  of  transportation  is  often  added  even 
though  there  has  been  no  transportation.  A  dozen 
exploiters  are  often  found  in  between  the  producer 
and  the  consumer. 

It  is  to  the  interest  of  the  speculators  to  limit  the 
supply  of  food.  This  is  done  through  the  control 
of  transportation,  slaughtering,  warehousing,  mill- 
ing, cold-storage  and  banking  credits.  These  agen- 
cies are  in  the  hands  of  speculators  who  first  secure 
control  of  the  supply  and  then  restrict  the  amount 
that  reaches  the  market.  In  order  to  limit  the  sup- 
ply, food  is  permited  to  decay  in  the  fields.  It  is 
permitted  to  rot  at  terminals.  It  is  dumped  into  the 
rivers  or  denied  access  to  market.  Local  produc- 
tion is  killed  in  order  to  prevent  competition. 
After  purchase  food  is  placed  in  warehouses  or  cold 
storage  plants  and  held.  In  a  thousand  ways  our 
food  supply  is  sabotaged  on  its  way  from  the  farmer 
to  the  consumer. 

[IS] 


CURTAILING   MILK    SUPPLY 

As  indicative  of  the  methods  employed  to  sabot- 
age food,  it  was  recently  disclosed  by  an  investiga- 
tion of  the  District  Attorney  of  New  York  City  that 
the  milk  trust  refused  to  permit  the  farmers  to 
bring  2,500,000  quarts  of  milk  to  market.  This 
was  enough  to  supply  every  family  in  the  metropolis 
with  two  quarts  of  milk  a  day.  The  farmers  were 
producing  it.  They  were  eager  to  dispose  of  it. 
But  the  milk  trust,  which  controls  the  distributing 
agencies  of  the  city,  refused  to  permit  it  to  be  sold. 
Representatives  of  the  trust  defended  its  action  by 
saying  that  there  was  a  milk  surplus;  they  admitted 
that  if  the  milk  were  permitted  to  be  sold  it  would 
reduce  the  price.  Yet  the  result  of  this  action  was 
to  destroy  nearly  two  million  dollars'  worth  of  prop- 
erty a  week:  the  farmers  were  the  poorer  by  this  sum, 
while  the  consumers,  and  especially  young  babies  of 
the  metropolis,  were  denied  food. 

Farmers  in  New  York  State  feed  their  milk  to  the 
hogs,  while  babies,  according  to  medical  investiga- 
tions, are  dying  in  the  cities  for  lack  of  it.  The 
cattle  men  of  the  West,  the  wheat  growers  of  the 
Dakotas,  the  truck  gardeners  everywhere,  make  the 
same  complaint. 

When  food  is  not  actually  destroyed,  it  is  held  in 
storage.  It  is  denied  transportation  facilities.  It 
is  permitted  to  decay  at  terminals  to  keep  down  the 
supply  that  reaches  the  market. 

[16] 


SACRIFICING   THE   FARMER 

As  a  result  of  this  process  the  farmer  Is  being 
driven  from  the  land.  At  the  end  of  a  season  he 
often  sees  his  effort  wasted  because  of  his  inabiUty 
to  find  a  market.  He  gives  up  one  kind  of  produce 
after  another.  When  he  sees  the  results  of  his  labor 
left  to  rot  on  the  ground,  when  he  has  it  refused 
by  commission  men,  when  the  freight  rates  amount  to 
more  than  he  realizes  on  his  produce,  he  gives  up  in 
despair.  This  is  one  reason  why  agriculture  is  un- 
profitable in  eastern  states  and  in  the  West  as  well. 
This  is  one  reason  why  thousands  of  farms  are 
going  out  of  cultivation.  The  eastern  farmer  es- 
pecially is  unable  to  market  his  cattle,  his  grain,  his 
vegetables,  and  his  fruit.  He  is  denied  a  market 
by  the  railroads  or  the  speculative  agencies  that  con- 
trol his  product.^ 

Farming  is  actually  being  destroyed.  It  is  not 
alone  the  tribute  the  exploiting  agencies  take;  it  is 
the  wealth  that  is  not  produced  that  is  alarming. 

THE    RAILROADS   AND   AGRICULTURE 

The  railroads  sabotage  agriculture  as  they  sabot- 
age independent  mine  owners,  independent  iron  and 

1  The  Agricultural  Bureau  of  the  State  of  New  York  states  that 
35,000  men  and  boys  left  the  farms  of  that  State  in  1919,  while 
only  about  11,000  changed  from  industry  to  farming.  New  York 
is  rapidly  being  denuded  of  farmers;  yet  it  is  a  state  of  rich  soil, 
fertile  valleys  and  the  best  market  in  the  world  at  its  doors.  Re- 
ports of  a  similar  exodus  are  made  by  the  United  States  Depart- 
ment of  Agriculture,  in  other  parts  of  the  country. 

[17] 


steel  producers,  independent  industry  of  all  kinds. 
Forty  years  ago  the  New  York  farmer  shipped  his 
cattle,  his  grain,  his  vegetables  and  his  fruit  to  New 
York  and  Buffalo.  The  New  England  farmer 
shipped  to  Boston.  They  had  the  best  markets  in 
the  world.  Cattle,  sheep  and  hogs  were  found  on 
every  farm.  So  were  dairy  cows.  The  farmer 
brought  his  produce  to  the  railway  station,  and  the 
railway  agent  solicited  his  freight,  which  the  rail- 
roads gladly  hauled  to  the  nearest  market.  The 
railroads  were  part  of  the  local  life  of  the  commun- 
ity. They  were  interested  in  upbuilding  agriculture. 
If  the  farmer  prospered,  the  railroad  prospered  in 
turn.  It  got  its  share  from  every  pound  of  produce 
that  was  conveyed  to  market.  It  was  to  the  eco- 
nomic interest  of  the  railroads  to  encourage  the  rais- 
ing of  cattle,  hogs,  sheep,  to  bring  fruit  and  other 
farm  produce  to  the  near-by  city  market.  In  those 
days  there  was  no  meat  trust,  no  egg,  poultry,  milk 
and  food  supply  trust.  Prices  were  fixed  by  com- 
petition, and  food  was  plentiful. 

LONG    HAUL    PROFITS 

In  the  closing  years  of  the  last  century  the  rail- 
roads were  consolidated  into  great  trans-continental 
systems.  There  are  to-day  four  great  systems 
radiating  out  from  New  York  to  Chicago  and  the 
Pacific  Coast.  The  Pacific  Coast  raises  apples,  fruit, 
and  farm  produce  in  abundance.  The  Dakotas,  Kan- 
sas and  Nebraska  raise  wheat  and  cattle.    California, 

[i8] 


Colorado,  Texas,  Florida  and  the  South  produce 
vegetables  of  all  kinds.  It  is  to  the  profit  of  the 
railroads  to  haul  freight  as  far  as  possible.  There 
Is  more  money  In  the  long  haul  than  there  Is  in  the 
short  haul.  There  is  a  bigger  return  from  hauling 
food  from  Seattle  or  Florida  to  New  York  than  there 
is  from  Syracuse  to  New  York.  The  feeding  of 
New  York  City  by  the  farmers  of  New  York  State 
reduces  railways  earnings.  It  cuts  down  profits. 
It  is  profitable  for  the  railroads  that  the  East  should 
be  fed  from  distant  states.  Produce  from  the 
Pacific  Coast  yields  possibly  a  hundred  times  as  much 
In  freight  earnings  as  does  the  produce  of  New  York 
and  Pennsylvania. 

Investigations  made  some  years  ago  by  the  State 
Market  Commissioner  of  New  York  showed  that 
New  York  apples,  recognized  to  be  among  the  best  in 
the  world,  rotted  each  year  on  the  ground,  while 
train  loads  of  Oregon  apples  came  to  New  York 
City  with  the  regularity  of  express  service.  The 
organized  agricultural  agencies  of  the  state  were 
denied  terminal  facilities  after  they  had  perfected 
a  state  organization  to  sell  their  produce.  Cattle 
from  all  over  the  country  are  sent  to  Chicago,  and 
after  being  killed,  the  meat  is  brought  back  to  the 
point  of  origin  to  be  eaten. 

The  farmers  of  New  England,  New  York,  of  our 
Eastern  States,  cannot  slaughter  their  cattle  as  they 
could  forty  years  ago.  The  slaughter-houses  have 
been  bought  up  by  the  meat  trust  or  killed  by  un- 

[19] 


fair  competition.  They  are  forbidden  or  regulated 
out  of  business  by  state  laws.  In  consequence, 
farmers  no  longer  raise  cattle  as  they  did  when  they 
had  a  local  market.  There  are  no  flocks  of  sheep 
on  the  hills  of  New  England.  The  farms  of  the 
East  lack  variety.  They  are  robbed  of  natural 
fertilizers.  They  no  longer  produce  all  kinds  of 
cattle,  because  the  farmers  have  been  deprived  of  a 
market. 

Truck  gardening  has  been  killed  by  a  similar  con- 
spiracy. The  commission  men  buy  from  distant 
points.  They  control  the  market  by  discriminating 
against  the  near-by  producer.  The  cattle  men  of 
the  West  labor  under  a  similar  disadvantage.  They 
are  confronted  by  a  combination  of  the  railroads  and 
the  packers.  In  addition  to  the  fact  that  it  is  to 
the  interest  of  the  railroads  to  haul  food  as  far  as 
possible,  the  interlocking  of  stock  ownership  be- 
tween banks,  railroads  and  the  packing  syndicate 
makes  discrimination  inevitable. 

RAILROAD    SABOTAGE 

Thus  the  railroads  sabotage  food  production. 
They  destroy  agriculture.  This  Is  one  of  the  rea- 
sons, it  may  be  the  most  important  reason,  why 
farms  are  being  abandoned  all  over  the  country. 

Food  scarcity  Is  not  due  to  the  lack  of  fertility 
of  American  soils.  It  Is  not  due  to  the  fact  that 
farmers  will  not  work,  or  that  the  soil  Is  exhausted. 
The  production  of  food  is  being  sabotaged  by  trans- 

[20] 


portation  agencies,  which  find  it  to  their  profit  to 
haul  food  as  far  as  possible,  irrespective  of  the  cost 
to  the  consumer.  It  is  also  to  their  profit  to  aid 
the  packer  and  speculator,  for  the  stockholders  of 
both  industries  are  often  the  same  men.  Private 
transportation  is  unsocial.  It  cannot  be  otherwise. 
We  cannot  run  the  railroads  for  profit,  and  at  the 
same  time  run  them  for  service,  for  there  is  more 
money  to  be  made  from  unsocial,  than  there  is  from 
social  operations.  The  railroads  are  more  respon- 
sible for  the  high  cost  of  living  than  any  other 
agency.  The  food  problem  cannot  be  solved  until 
we  first  solve  the  railroad  problem.  And  we  may 
delay  the  solution  so  long  that  the  American  farm 
will  be  destroyed  in  the  process.  This  is  by  no 
means  impossible.^ 

1  An  official  preliminary  report  of  the  United  States  Census  for 
1920  discloses  a  startling  exodus  from  the  land.  During  the  pre- 
ceding ten  years  the  city  population  increased  7J/2  times  as  fast  as 
the  rural  population.  The  urban  population  increased  at  the  rate 
of  25.2  per  cent,  during  the  decade  and  the  farming  population  but 
3.2  per  cent.  The  present  urban  population  is  54,796,100  and  the 
rural  population  50,972,000.  Ten  years  ago  the  urban  population 
was  42,623,383  and  the  rural  population  49,383,883. 


[21] 


CHAPTER  IV 
CIRCULATION 

The  railroads  have  been  handed  back  to  private 
operation,  because  private  operation  is  said  to  be 
more  efficient  than  public  operation.  Private  initia- 
tive, it  is  claimed,  will  develop,  because  it  is  to  its 
interest  to  develop,  the  best  transportation  system 
possible  for  meeting  the  needs  of  the  country.  It 
is  to  the  advantage  of  private  capital,  it  is  said,  to 
make  economies,  to  promote  efficiency,  and  to  de- 
velop the  agencies  of  transportation  so  that  they 
will  be  serviceable.  This  is  the  argument  which 
underlies  all  others  for  entrusting  the  railroads  to 
private  hands. 

Every  one  admits  the  importance  of  transporta- 
tion to  the  life  of  the  nation.  Upon  it  almost  every 
other  activity  depends.  We  realized  this  depend- 
ence a  few  months  ago,  when  an  unauthorized  rail- 
way strike  paralyzed  part  of  the  nation.  The  same 
situation  confronted  us  in  the  months  before  the 
government  assumed  control.  Certain  sections  of 
the  country  were  in  a  state  of  industrial  collapse. 

[22] 


New  England  was  paralyzed.  So  was  western 
Pennsylvania.  The  great  arteries,  east  and  west, 
for  carrying  coal  and  munitions  were  clogged  with 
trains  which  did  not  move.  Not  only  had  the  rail- 
road system  broken  down,  it  had  carried  farmers, 
manufacturers,  and  workers  with  it. 

The  amount  of  wealth  that  we  produce  is  fixed  by 
the  amount  that  can  be  transported.  The  railroads 
determine  whether  coal  shall  move  from  the  mouth 
of  the  mine;  whether  iron  and  steel  shall  reach  the 
shops  which  convert  it  into  the  finished  product. 
The  railroads  decide  for  the  farmer  as  to  whether 
his  produce  will  be  brought  to  the  market,  and  a 
few  years  ago,  wheat,  corn  and  other  cereals  rotted 
on  the  ground  in  the  northwest,  because  of  the 
failure  of  cars.  This  is  suggestive  of  the  extent 
to  which  the  transportation  agencies  figure  in  the 
production  of  wealth.  They  control  it.  It  is  ob- 
viously impossible  to  expect  the  manufacturer,  the 
farmer,  and  the  producer  to  bring  forth  wealth, 
unless  it  can  be  brought  to  market. 

Is  it  true  that  the  men  to  whom  the  railroads  have 
been  returned  are  interested  in  developing  a  trans- 
portation system  that  will  serve  the  nation?  Is 
it  to  their  interest,  their  primary,  absorbing  interest, 
to  develop  such  a  system  as  the  country  needs? 
Have  they  the  same  interest  in  developing  trans- 
portation that  the  merchant  has  in  expanding  his 
business;  that  the  manufacturer  has  in  building  up 
his  plant;  or,  have  the  men  to  whom  the  railroads 

[23] 


have  been  returned,  other  interests;  interests  more 
profitable  to  them  than  railroading;  interests  that 
are  possibly  hostile  to  efficient  railroading?  Have 
we  invited  production  or  sabotage  by  placing  the 
railroads  in  private  hands? 

TO    WHOM    HAVE    THE    RAILROADS    GONEf 

In  the  first  place,  the  railroads  are  not  operated 
by  the  owners.  They  are  not  operated  by  bond- 
holders. They  have  no  voice  in  the  management. 
They  have  no  vote.  They  are  mere  mortgagees. 
They  own  $12,000,000,000  of  securities.  Nor  do 
the  stockholders  manage  the  railroads.  The  aver- 
age stockholder  does  not  even  attend  the  annual 
meetings.  At  most,  he  sends  a  proxy  to  some  one  to 
vote.  The  railroads  have  gone  back  to  the  men  who 
controlled  them  before  the  war.  Those  men  are 
bankers.  The  report  of  the  Pujo  investigating 
committee  in  19 13  disclosed,  what  was  a  well-recog- 
nized fact,  that  the  main  transportation  agencies  of 
the  country  were  controlled  by  four  big  banking 
institutions  of  New  York,  which  banks,  through  inter- 
locking directorates,  consolidated  the  railroads  of 
the  country  into  what  was  in  effect  a  single  railroad 
system.^ 

This  condition  has  not  been  changed.  All  dis- 
cussion of  the  railroad  question,  of  efficiency  of 
management,  of  the  service  to  be  rendered,  must  be 

^  Committee  to  Investigate  the  Concentration  of  Control  of  Money 
and  Credit.     H.  of  R.  Report  1593. 

[24] 


based  upon  a  recognition  of  the  fact  that  the  rail- 
roads are  operated  by  bankers. 

RAILROADING   AND    BANKING 

The  250,000  miles  of  railroads  of  America  are 
not  controlled  by  trained  and  experienced  railroad 
men.  They  are  controlled  by  men  with  thousands 
of  other  interests.  For  the  men  that  control  the 
railroads  control  the  major  trusts  of  America. 
They  control  the  great  banks  and  insurance  com- 
panies. They  control  international  and  domestic 
finance.  They  control  iron,  coal,  copper,  the  public 
utility  corporations,  rubber,  sugar,  oil  and  gas. 
Their  interests  radiate  into  hundreds  of  other  cor- 
porations scattered  all  over  the  land.  Each  rail- 
road director  serves  upon  scores  of  other  director- 
ates. At  most,  he  can  give  no  more  than  a  fraction 
of  his  thought  to  the  railroad  business,  about  which 
he  often  knows  little  more  than  what  is  shown  by  the 
annual  balance  sheets. 

Are  the  railway  bankers  interested  in  making  the 
railroads  serviceable?  Or  are  they  interested  in 
other  things? 

The  history  of  the  last  twenty  years  indicates  the 
attitude  of  banking  managers  to  railroading,  to  the 
development  of  industry  and  commerce,  to  the  in- 
terests of  the  stockholders  and  the  workers.  The 
bankers  are  primarily  interested  in  banking  profits 
and  commissions.  They  are  interested  in  issuing 
new  securities.     They  were  interested  in  such  trans- 

[25] 


actions  as  wrecked  the  New  Haven  Railroad,  the 
Frisco,  the  Pere  Marquette,  the  Rock  Island,  Chi- 
cago &  Alton,  and  scores  of  other  properties.  The 
securities  of  some  of  these  roads,  which  had  a  value 
like  that  of  a  government  bond,  were  depreciated  al- 
most to  the  vanishing  point.  The  capital  stock  of 
the  New  Haven  Railroad  sold  for  over  two  hun- 
dred dollars  a  share.  It  fell  to  less  than  fifty  dol- 
lars a  share.  The  same  is  true  of  the  Rock  Island 
system. 

These  are  some  of  the  exploiting  interests  of  the 
men  to  whom  the  railroads  have  been  returned. 
They  are  interested  in  railroad  service  as  earnings 
affect  the  stock  market.  It  is  to  their  interest  to 
spend  as  little  as  possible  on  improvements  and  bet- 
terments, in  order  that  they  may  take  as  much  as 
possible  in  profits  and  dividends. 

Here  at  the  beginning,  we  have  an  almost  un- 
answerable reason  why  the  Government  should  have 
retained  the  railroads  until  it  could  find  clean  and 
expert  hands  to  whom  it  could  return  them.  Our 
first  concern  should  be  that  the  men  who  operate  the 
railroads  are  practical  railroad  men;  that  they  are 
men  who  are  experts  and  are  interested  in  develop- 
ing transportation  to  meet  the  nation's  needs. 

WILL    THE    RAILROADS    DEVELOP    THE    COUNTRY? 

A  railroad  should  be  open  to  all  on  equal  terms; 
it  should  be  a  public,  not  a  private,  highway;  it  should 
be  operated  at  the  lowest  possible  cost.     It  is  neces- 

[26] 


sary  if  industries  and  communities  are  to  develop, 
first,  that  they  be  sure  of  a  means  of  reaching  their 
market,  and  second,  that  they  have  equal  treatment 
with  their  competitors.  These  should  be  axioms  of 
railroad  administration. 

For  thirty  years  the  railroads  have  signally  failed 
to  satisfy  these  requirements.  Instead  of  being  im- 
partial carriers  of  freight,  they  have  been  used  to 
foster  monopoly  and  destroy  independent  industry. 
It  was  railway  rebates  that  built  up  the  Standard 
Oil  monopoly  from  a  small  refinery  in  Cleveland, 
Ohio,  into  the  colossal  corporation  that  it  is.  The 
packing  monopoly  received  similar  favors.  It  was 
permitted  to  own  refrigerator  cars,  and  through  such 
ownership  competing  packers  were  discriminated 
against.  The  history  of  the  consolidation  of  the 
anthracite  coal  fields  is  a  story  of  the  destruction  and 
bankruptcy  of  independent  coal  operators,  by  the 
refusal  of  the  anthracite  coal  roads  to  give  them 
cars.  In  this  way  the  anthracite  coal  roads  ob- 
tained control  of  ninety-six  per  cent,  of  the  coal 
production  of  eastern  Pennsylvania.  The  same 
processes  were  pursued  as  to  bituminous  coal.  By 
these  means  the  railroads  acquired  or  controlled, 
directly  or  indirectly,  great  coal  fields.  These  coal 
properties  are  highly  profitable.  The  same  is  true 
of  iron  and  steel,  which  is  merged  into  five  major  cor- 
porations. All  these  industries  now  enjoy  a  favored 
position  in  the  market  because  the  railroads  can 
grant  them  cars  and  deny  them  to  others.     They 

[27] 


can  grant  privileges  and  favors,  which  they  deny  to 
outside  producers.  There  is  no  law  that  can  reach 
these  evils  under  private  control. 

INDUSTRIAL    CONCENTRATION 

An  examination  of  the  report  of  the  Pujo  investi- 
gating committee  gives  some  indication  of  the  ex- 
tent to  which  the  railroads  are  interlaced  with  in- 
dustrial corporations.  They  are  interlaced  by  com- 
mon stockholders,  by  common  directors,  by  common 
officers.  It  is  impossible  for  these  officers  to  treat 
outside  competitors  fairly,  or  to  permit  competition 
to  play  freely  on  any  of  the  corporations  in  which 
the  railway  owners  are  interested.  These  cor- 
porations include  almost  every  basic  industry  and 
every  form  of  food  as  well. 

Here,  again,  we  have  a  reason  why  the  railroads 
under  private  operation  cannot  serve  the  country.  It 
is  against  their  interests  to  develop  new  business,  to 
open  up  new  resources,  to  stimulate  the  productive 
power  of  the  nation.  Rather,  their  interests  are 
against  such  development.  It  is  to  their  interest 
to  destroy,  not  create,  competition;  to  smother  initia- 
tive, not  encourage  it. 

Not  alone  the  major  industries  but  thousands  of 
other  industries  are  interlaced  with  railroad  stock- 
holders and  directors.  The  packing  syndicate 
owned  or  controlled  upwards  of  seven  hundred  dif- 
ferent kinds  of  industries.  These  industries,  in 
turn,  were  linked  up  with  the  railroads  through  the 

[28] 


close  relationship  of  the  packing  plants  with  rail- 
road directors.  They,  too,  were  in  a  position  to 
secure  favors.  They,  too,  were  in  a  position  to  kill 
off  competition.  There  is  scarcely  a  competitive  in- 
dustry of  any  importance  that  is  not  subject  to  being 
killed  by  the  railroads,  to  whose  interest  it  may  be 
and  often  is  to  destroy  them. 

Why,  it  may  be  asked,  is  this  true?  For  the 
simple  reason  that  the  directors  of  the  railroads  own 
only  a  small  portion  of  the  railway  securities.  Their 
dividends  from  this  source  may  be  negligible.  The 
rates  the  railroads  may  charge  are  fixed  by  the  In- 
terstate Commerce  Commission.  The  directors  and 
stockholders  have  much  larger  holdings  and  much 
greater  financial  interest  in  industrial  plants.  They 
make  more  money  out  of  these  industries  than  they 
do  out  of  the  railroads.  If  they  can  give  them  ex- 
clusive privileges,  there  is  no  limit  to  the  profits 
which  they  may  enjoy.  It  is  not  because  men  are 
criminal  that  this  is  true.  It  is  because  human 
nature  instinctively  leads  men  to  use  their  power  to 
increase  their  economic  advantages  by  any  means  at 
hand. 

Here  is  one  of  the  most  destructive  forms  of  sabo- 
tage. The  railroads  check  production.  They  limit 
output.  They  prevent  the  production  of  wealth. 
They  establish  an  embargo  about  the  farmer,  the 
manufacturer,  the  mine  operator  and  all  labor  as 
well. 

[29] 


RAILWAY   SUPPLY    CORPORATIONS 

Nor  is  it  to  the  interest  of  the  private  owners  to 
operate  the  railroads  economically.  The  reverse 
is  true.  It  is  to  their  interest  to  operate  them  ex- 
travagantly. Under  the  Cummins-Esch  act,  re- 
cently passed  by  Congress,  the  railroads  are  guaran- 
teed a  rate  sufficient  to  yield  six  per  cent,  on  their 
property.  This  guarantee  is  in  addition  to  operat- 
ing expenses,  and  taxes.  No  more  wasteful  propo- 
sal could  possibly  be  made.  It  encourages  wasteful- 
ness, rather  than  economy.  Neither  the  operating 
officials  nor  the  stockholders  are  under  any  spur  to 
keep  down  operating  costs,  for  their  returns  are 
guaranteed  by  the  nation.  This  is  a  cost-plus  plan 
with  a  vengeance.  It  is  an  invitation  to  waste  and 
extravagance. 

There  is  an  additional  reason  why  this  is  true. 
Several  years  ago  the  Interstate  Commerce  Com- 
mission made  an  investigation  of  the  extent  to  which 
railways  officers  and  stockholders  were  interested  in 
corporations  which  dealt  with  the  railroads.  This 
investigation  showed  that  directors  of  practically  all 
the  railroads  were  stockholders  and  officers  in  other 
corporations,  which  supplied  the  railways  with  every 
kind  of  material,  including  steel  rails,  coal,  locomo- 
tives, cars,  and  equipment  of  all  kinds.  Almost 
every  need  of  the  railroads  was  supplied  by  cor- 
porations in  which  the  railway  stockholders,  offi- 
cials and  directors  were  financially  interested.     Rail- 

[30] 


road  officials  bought  from  themselves.  Buying  from 
themselves,  it  was  not  to  their  interest  to  buy  cheaply. 
Operating  costs  were  increased  In  consequence.  It 
is  not  in  human  nature  to  be  over-scrupulous  under 
such  conditions. 

INVITATIONS   TO   WASTE 

The  railroads  are  the  largest  single  buyers  of 
supplies  in  the  country.  They  buy  four  hundred 
and  fifty  million  dollars'  worth  of  coal  alone.  They 
spend  hundreds  of  millions  on  rails,  on  locomotives, 
on  cars,  on  equipment.  They  have  interlocking  con- 
tracts with  the  express  companies,  with  the  fast 
freight  line  companies,  with  the  Pullman  Company, 
with  terminal  railroads,  union  bridges,  tug  and  barge 
companies.  They  are  Interlaced  with  the  packers, 
with  cold  storage,  food  and  supply  warehouses,  with 
advertising  concessionaries,  with  transfer  companies, 
with  news  agencies,  with  every  kind  of  supply  house 
which  sells  materials  in  which  the  railroads  stand  In 
need.  Officials  of  the  railroads  even  control  em- 
ployment agencies.  These  agencies  secure  a  com- 
mission on  every  man  employed.  It  is  in  the  interest 
of  these  employment  offices  to  hire  and  fire  as  many 
men  as  possible. 

Here  we  have  a  condition  in  which  It  Is  to  the  In- 
terest of  the  railroads  to  pay  excessive  prices  for 
equipment,  cars  and  coal,  for  lighterage  and  rental, 
for  practicaly  every  purchase  save  labor.  These 
purchases  run  into  the  hundreds  of  millions.     Labor 

[31] 


alone  is  outside  of  the  interlocked  commodities  under 
the  control  of  the  railroad  syndicates. 

Efficiency  and  economy  are  impossible  under  such 
conditions.  Human  nature  cannot  stand  such  a 
strain.  The  Interstate  Commerce  Commission  can- 
not supervise  purchases.  Neither  the  commission 
nor  any  laws  that  can  be  enacted  could  reach  these 
evils.  Years  ago,  the  United  States  Supreme  Court 
divorced  the  railroads  from  the  ownership  of  coal 
mines.  Various  devices  were  immediately  adopted 
by  the  railroads  to  avoid  this  decision.  Many  rail- 
roads created  another  corporation  to  which  the  rail- 
road transferred  its  coal  properties.  The  stock- 
holders and  directors  in  the  coal-mining  corporations 
are  the  same  as  the  stockholders  and  directors  of  the 
railroads.  There  are  two  corporations  instead  of 
one.  This  was  the  net  result  of  years  of  costly  liti- 
gation. 

Again  under  any  kind  of  private  operation,  the 
Interstate  Commerce  Commission  is  required  to  per- 
mit rates  that  will  pay  operating  expenses  and  en- 
able the  railroads  to  secure  capital  with  which  to 
make  extensions  and  improvements.  Inasmuch  as 
rates  must  be  the  same  on  all  competing  roads,  and 
as  the  directors  of  the  prosperous  roads  are  also 
stockholders  and  directors  in  the  weak  roads,  it  is 
to  their  interest  to  promote  extravagant  expenditures 
so  that  the  weak  roads  will  be  able  to  demand  a 
freight-rate  structure  that  will  confer  large  profits  on 
the  stronger  roads.     To  make  the  weak  roads  self- 

[32] 


supporting,  strong  roads  must  be  given  colossal  pro- 
fits. It  is  impossible  under  private  ownership  with 
the  interlocking  corporations  and  interests  which 
must  inevitably  exist,  to  avoid  these  evils  or  the  colos- 
sal price  which  the  country  must  pay  in  consequence. 
A  guarantee  of  earnings  is  an  invitation  to  loose  and 
wasteful  management.     It  cannot  be  otherwise.^ 

WATER    TRANSPORT 

America  has  the  greatest  system  of  inland  water- 
ways in  the  world.  They  include  the  Great  Lakes 
from  Duluth  to  Buffalo  with  the  Erie  Barge  Canal 
connecting  the  lakes  with  the  port  of  New  York. 
The  continent  is  interlaced  with  waterways  radiating 
out  from  the  Mississippi,  while  coastal  rivers  in  New 
England,  New  York  and  the  Atlantic  Seaboard 
penetrate  inland  far  from  the  seaboard. 

Water  transportation  costs  about  one-seventh  as 
much  as  rail  transportation.  It  is  universally  de- 
veloped by  European  countries.  The  waterways  of 
Germany  carry  almost  all  of  the  heavy  freight. 
France,  Belgium  and  Austria  have  brought  their 
rivers  and  canals  to  a  high  state  of  efficiency.  Be- 
ing state  owned  it  is  to  the  interest  of  the  commun- 
ity to  carry  freight  as  cheaply  as  possible. 

The  Great  Lakes  and  the  Erie  Barge  Canal  carry 
less  freight  to-day  than  they  did  twenty  years  ago. 
The  Great  Lakes  are  in  effect  a  private  railroad  and 

1  As  to  the  effect  of  private  operation  of  the  railroads  on  farming 
and  the  production  of  food,  see  Chapter  III. 

[33] 


steel  trust  preserve.  The  railroads  have  killed  water 
transportation.  They  endeavored  to  prevent  the 
building  of  the  Panama  Canal.  They  have  closed 
great  ports  and  harbors  along  the  seaboard  and  have 
monopolized  most  of  the  harbors  of  the  Great  Lakes. 
They  have  converted  waterways  upon  which  the  Gov- 
ernment has  spent  millions  of  dollars  into  private 
possessions.  Inland  water  transportation  in  the 
United  States  has  been  destroyed  by  the  railroads 
just  as  a  generation  and  a  half  ago  the  railroads 
acquired  the  canals  built  at  great  expense  by  the 
states  and  permitted  them  to  fall  into  disuse. 

Water  transportation  means  cheap  transportation. 
It  means  competitive  transportation.  It  could  be 
developed  very  easily  if  we  were  free  to  do  so.  But 
the  railroads  have  sabotaged  waterways.  They 
have  sabotaged  our  coastal  trade.  They  have 
sabotaged  our  harbors  and  have  throttled  the 
development  of  transportation  which  they  are 
dedicated  to  promote.  It  is  doubtful  if  we  can 
have  inland  water  transportation  so  long  as  the  rail- 
roads are  in  private  hands.  Neither  the  railroads 
nor  the  banks  will  permit  capital  to  go  into  water- 
ways development.  The  railroads  will  kill  such 
traffic  once  it  becomes  a  serious  competitor  to  rail- 
way freight  rates. 

HYDRO-ELECTRIC    POWER 

Mr.  McAdoo,  when  Director  General  of  the  Rail- 
roads, urged  that  our  railroads  should  be  operated 

[34] 


by  hydro-electric  power.  He  pointed  to  the  water 
power  which  existed  all  over  the  country  and  which 
if  developed  would  greatly  reduce  operating  rail- 
road costs  and  conserve  our  fuel  supply.  We  al- 
ready have  an  example  of  hydro-electric  power  de- 
velopment at  Niagara  Falls  by  the  Province  of 
Ontario.  Power  Is  generated  in  bulk  and  is  dis- 
tributed from  one  end  of  the  Province  to  the  other 
and  sold  to  the  cities  and  to  individual  consumers  at 
a  very  low  rate.  Switzerland  has  electrified  her 
railroads,  Bavaria  has  done  the  same  thing,  as  has 
Norway. 

Suggestions  have  been  made  by  Interstate  Com- 
merce Commissioner  Robert  W.  WooUey  for  cen- 
tral power  stations  erected  at  the  mouths  of  the 
coal  mines,  which  would  generate  power  in  bulk 
for  the  operation  of  the  railroads.  Many  valuable 
by-products  would  be  secured  in  the  process. 

The  consumption  of  fuel  by  the  railroads  is  placed 
at  150,000,000  tons  a  year.  In  addition,  40,000,- 
000  barrels  of  oil  are  consumed.  It  is  assumed  that 
the  only  obstacle  in  the  way  of  such  electrical  de- 
velopment is  the  cost  involved.  Even  this  would 
preclude  such  development  by  the  railroads.  But 
this  is  not  the  main  reason  why  the  railroads  will 
not  electrify  their  properties  or  build  central  power 
plants.  The  owners  of  the  railroads  being  also  the 
owners  of  coal  mines  would  lose  a  market  for  their 
coal.  The  railroads  are  their  own  best  customers. 
The  directors  enjoy  enormous  dividends  from  this 

[35] 


source.  The  railroads'  fuel  bill  is  $450,000,000  a 
year.  The  railroads,  too,  derive  one  third  of  their 
revenues  from  the  hauling  of  coal;  a  revenue  that 
would  be  lost  if  water  power  were  harnessed  and 
nature  did  the  work  directly. 

The  public  has  a  right  to  the  economy  that  would 
come  from  such  a  cheapening  of  power;  the  pub- 
lic is  entitled  to  the  greater  cleanliness  that  would 
follow.  The  public  also  wants  cheap  light.  Fac- 
tories want  cheap  power.  Our  cities  and  even  the 
country  districts  could  be  lighted  far  more  brilliantly 
with  power  developed  in  bulk,  and  distributed  from  a 
central  station.  Moreover  an  immense  amount  of 
coal  and  oil  would  be  saved. 

CONFLICT    OF    ECONOMIC    INTEREST 

But  these  economies,  these  conveniences,  these 
services,  conflict  with  the  profits  which  the  railroad 
owners  make  as  owners  of  the  coal  mines.  Social 
gains  run  counter  to  private  gains.  So  the  railroads 
refuse  to  use  or  permit  us  to  use  the  power  which 
nature  has  placed  in  our  hands,  while  all  of  us  suffer 
many  inconveniences,  we  exhaust  our  limited  coal 
and  oil  resources  as  a  result  of  this  unsocial  condi- 
tion. The  wastage  involved  runs  into  the  hundreds 
of  miUions  annually,  while  the  loss  and  dirt  to  our 
homes  and  to  society  runs  into  hundreds  of  millions 
of  dollars  more. 

Here  again,  we  find  that  the  monopoly,  profit- 

[36] 


making  motive  in  railroading  checks  improvements; 
it  prevents  economies;  it  sabotages  civilization. 

Commenting  on  the  wastage  in  the  coal  mining 
industry  and  the  gains  which  would  come  from  cen- 
tral power  stations,  Mr.  W.  H.  Polakov,  an  expert 
consulting  engineer,  said: 

*'  One-third  of  our  railroad  freight  is  coal.  The 
people  who  control  our  coal  mines  have  also  a  heavy 
interest  in  railroad  securities.  Any  improvement  in 
the  utilization  of  our  coal  which  would  result  in  de- 
creasing the  amount  of  railroad  freight,  would 
diminish  the  value  of  railroad  securities.  This 
would  mean  heavy  losses  to  the  same  financial  in- 
terests. To  prevent  this  we  waste  our  resources 
and  burden  the  people  with  costs  of  production 
which  make  life  an  agonizing  struggle.  A  proper 
utilization  of  our  coal  resources  would  reduce  the 
number  of  men  employed  in  the  mines.  We  could 
get  all  the  coal  we  need  by  eliminating  80  per  cent, 
of  our  mines  and  about  80  per  cent,  of  our  miners. 
This  means  a  re-organization  in  industrial  processes 
which  neither  employers  nor  workers  are  as  yet  will- 
ing to  consider." 

RAILWAY    EXTENSIONS 

Undoubtedly  railway  extensions  are  badly  needed 
to  develop  the  productive  power  of  the  country. 
Spurs  should  be  run  to  coal  and  iron  mines,  to  cop- 
per mines,  to  docks  and  harbors.     Every  large  city 

[37] 


needs  a  unification  of  its  terminals  and  freight  sta- 
tions. This  would  develop  freight,  which  in  turn 
would  increase  the  earnings  of  the  railroads.  But 
it  is  not  to  the  interest  of  the  railway  owners  to 
open  up  new  territory,  to  build  new  lines,  to  stimu- 
late production.  According  to  investigations  of  the 
Interstate  Commerce  Commission,  the  railroads  have 
divided  the  country  into  closed  districts.  Other  rail- 
roads keep  out.  Banks  refuse  to  compete  in  the 
floating  of  securities.  America  is  divided  into 
feudal  domains,  in  each  of  which  a  single  railway 
system  is  supreme.  There  is  no  particular  reason 
why  these  systems  should  expand  their  mileage. 
There  is  every  reason  why  they  should  not  do  so  if 
such  mileage  would  bring  competition  to  the  indus- 
tries which  the  railway  owners  control.  The  profits 
which  railway  owners  enjoy  from  other  industries 
operate  to  prohibit  the  expansion  and  development 
of  our  transportation  agencies  to  meet  the  varied 
needs  of  the  country  as  a  whole. 

BOYCOTTING   THE    NATION 

The  railroads  sabotage  the  country  as  a  whole  for 
the  benefit  of  favored  railroads  or  favored  ports,  and 
interests.  In  so  doing  they  increase  the  cost  to  the 
public.  We  see  this  in  the  upbuilding  of  favored 
ports,  just  as  a  generation  ago  the  same  influence  led 
to  the  upbuilding  of  favored  industries.  The  entire 
eastern  seaboard  from  New  York  to  Florida,  as  well 
as  the  Gulf  of  Mexico  as  far  west  as  the  Rio  Grande 

[38] 


River,  contain  splendid  harbors  with  a  rich  hinter- 
land in  which  traffic  could  be  developed.  Many  of 
these  harbors  have  been  improved  by  the  Federal 
Government  at  great  expense.  So  have  the  rivers 
which  flow  into  them.  This  is  true  of  Baltimore, 
Norfolk,  Charleston,  Savannah,  Mobile,  New 
Orleans,  and  Houston.  A  natural  railroad  policy 
would  carry  freight  from  the  far  west  and  the  middle 
west  to  the  Gulf  ports.  It  would  link  up  the  Missis- 
sippi and  tributary  streams.  It  would  carry  freight 
from  Chicago  and  the  central  industrial  regions  as 
well  as  the  southern  states  to  these  South  Atlantic 
and  Gulf  of  Mexico  harbors.  Our  South  American, 
Central  American  and  Asiatic  commerce  would  pass 
through  these  channels  and  lines  of  communication 
and  terminal  facilities  would  be  established  at  these 
ports.  Steamship  lines  would  connect  with  Europe, 
South  and  Central  America,  and  the  Orient,  by  way 
of  the  Panama  Canal.  This  would  mean  shorter 
hauls,  quicker  deliveries,  shorter  ocean  routes  and 
uncongested  harbor  facilities. 

Under  federal  operation,  these  ports  have  re- 
ceived their  share  of  the  traffic.  They  developed 
steamship  lines.  They  enjoyed  a  new  prosperity. 
Under  private  operation,  however,  the  short  haul 
and  the  near-by  harbor  was  discriminated  against  in 
favor  of  the  North  Atlantic  ports  and  especially 
New  York,  even  though  New  York  is  the  most 
expensive  of  ports.  Southern  shipping  was  dis- 
couraged, as  was  southern  industry.     The  railroads 

[39] 


prefer  the  long  haul.  And  they  do  everything  pos- 
sible to  encourage  it.  They  haul  produce  from  the 
far  west  and  the  middle  west  to  New  York.  This 
however  is  not  the  only  reason  for  this  policy. 

The  officials  who  control  the  railroads  own  the 
banks  of  New  York,  which  do  an  international  bank- 
ing and  credit  business.  They  own  the  so-called 
shipping  trust.  They  control  barges,  warehouses, 
terminals  and  countless  other  agencies  in  and  about 
New  York  which  are  tributary  to  and  derive  large 
revenues  from  the  railroads.  It  is  to  the  interest 
of  the  railroad  owners  to  divert  all  traffic  possible 
to  New  York  in  order  to  secure  profits  for  other 
industries.  As  a  result  the  port  is  congested. 
Operating  costs  are  increased,  while  the  industrial 
life  of  the  nation  is  sabotaged  for  the  benefit  of  a 
small  group  of  men  who  own  the  port,  ocean  and 
warehouse  facilities  of  a  single  port.  The  service 
motive  of  transportation  is  subordinated  to  a  profit 
motive  that  is  inimical  to  the  country  as  a  whole. 

The  assumption  that  private  ownership  can  be 
relied  upon  to  develop  the  railroad  industry  has 
broken  down  in  America  as  it  has  in  all  other  coun- 
tries. Transportation  is  a  secondary  interest  with 
railway  operators.  No  one  can  estimate  the  extent 
to  which  our  whole  industrial  life  is  arrested  in 
consequence.  Along  with  credit  and  the  monopoly 
of  basic  resources  the  private  ownership  of  the  rail- 
roads is  the  great  obstacle  to  the  development  of 
the  productive  resources  of  the  nation. 

[40] 


CHAPTER  V 

LAND 

Society  itself  sabotages  production.  It  sabotages 
the  source  of  all  wealth.  Society  in  fact  is  the  worst 
offender  of  all.  All  industry  is  dependent  upon  the 
resources  of  nature.  The  fuel  we  burn,  iron  ore, 
oil,  and  copper,  the  timber  of  our  forests,  and  the 
food  which  suppHes  man  with  energy,  all  come  from 
the  land,  the  source  of  all  life,  of  all  industry.  Yet 
society  has  sanctioned  a  system  that  results  in  the 
great  bulk  of  our  natural  resources  being  kept  out 
of  use. 

Up  to  a  generation  ago,  man  was  his  own  master. 
He  worked  for  himself.  He  could  take  up  a  home- 
stead in  the  West.  He  could  build  his  own  fortunes. 
But  he  could  do  so  only  by  labor.  He  could  live 
only  by  his  own  efforts.  He  had  to  hew  the  forests, 
break  the  soil,  and  produce  food  with  which  to  sup- 
port himself  until  another  season  rolled  around. 
Then  our  laws  invited  the  tenant  and  the  city  dweller 
from  the  eastern  seaboard  to  the  western  prairies. 
Then  the  teachers  of  political  economy,  the  press 
and  statesmen,  saw  life  in  terms  of  production  and 
of  competition  as  well.     There  are  few  tenants  in 

[41] 


a  new  country,  and  few  landlords.  There  Is  no  rent 
and  no  profits.  For  every  man  can  work  for  him- 
self. He  can  live  by  his  own  labor  on  his  own  land. 
For  250  years  we  held  to  the  idea  that  it  was  a 
good  thing  for  men  to  work  for  themselves.  We 
believed  in  competition,  in  cheapness.  We  believed 
in  quantity  production.  This  was  the  most  charac- 
teristic thing  of  America. 

OUR   WASTEFUL    LAND    POLICY 

By  the  end  of  the  last  century  our  public  domain 
as  well  as  our  mineral  resources  had  been  disposed 
of.  Title  deeds  had  passed  from  the  Government 
to  individual  owners.  Then  followed  a  profound 
change  in  all  of  the  relations  of  life.  Land  now 
had  a  new  value;  a  value  it  had  never  possessed  be- 
fore. Up  to  this  time  men  wanted  land  only  as 
a  means  of  making  a  living.  If  richer  land  was 
available  in  a  neighboring  state,  men  abandoned 
their  old  farms  and  took  up  new  ones.  Land  had 
a  value  only  to  the  worker.  It  was  an  economic 
value,  pure  and  simple.  Men  took  only  so  much 
land  as  they  could  cultivate.  The  farms  of  New 
England,  New  York  and  the  original  colonies  in  the 
north,  were  from  fifty  to  one  hundred  acres  in  ex- 
tent. 

When  the  land  was  all  gone,  land  acquired  a  spec- 
ulative value.  The  homestead  lands  rose  in  value 
to  five  and  ten  dollars  an  acre.  Within  the  next 
decade  these  same  lands  shot  to  twenty  and  thirty 

[42] 


dollars  an  acre.  By  the  end  of  the  century,  land  In 
Illinois,  Iowa  and  Kansas  was  worth  from  fifty  to 
seventy-five  dollars  an  acre. 

Population  grew.  More  people  went  to  the 
cities.  A  larger  percentage  of  the  population  was 
engaged  in  industry.  This  increased  the  value  of 
food.  It  increased  the  value  of  land.  To-day  land 
in  Iowa,  Illinois,  and  parts  of  Kansas,  that  fifty  years 
ago  was  worth  little  or  nothing,  is  selling  at  from 
three  hundred  to  four  hundred  dollars  an  acre.  The 
war  gave  a  speculative  value  to  some  land  in  these 
states  of  from  five  hundred  to  six  hundred  dollars 
an  acre.  In  California  land  is  held  at  from  a  thou- 
sand to  two  thousand  dollars  an  acre,  that  a  genera- 
tion ago  had  little  or  no  value  whatever. 

LA.ND    SPECULATION 

It  has  become  profitable  to  hold  land  out  of  use; 
to  permit  it  to  lie  idle.  Each  year  the  needs  of  the 
world  increase;  each  year  population  crowds  against 
the  land.  And  each  year  land  increases  in  value, 
just  as  does  the  value  of  the  coal  deposits,  the  iron 
ore  deposits,  the  copper  deposits,  and  the  standing 
timber.  It  is  more  profitable  to  speculate  in  land 
than  it  is  to  work  land. 

Society  itself  is  sabotaging  production.  It  does 
this  by  permitting  men  to  idly  wait  for  the  neces- 
sities of  mankind  to  make  them  rich.  The  result  of 
our  land  policy  is  to  Hmit  production.  It  sabotages 
future  generations  as  well. 

[43] 


This  in  turn  sabotages  all  other  forms  of  industry. 
It  made  monopoly  possible  in  iron,  steel,  fuel,  oil, 
copper  and  timber.  Raw  materials  are  basic  to  all 
industry. 

The  new  psychology  of  labor  is  also  a  result  of 
land  monopoly.  When  men  could  no  longer  take  up 
a  homestead  they  became  of  necessity  wage  earners 
or  tenants.  They  had  no  other  alternative.  They 
had  to  work  for  some  one  else.  For  a  generation 
they  worked  willingly  because  of  the  tradition  of 
equality  and  the  widespread  belief  that  any  man 
might  rise  above  his  station  and  escape  into  the 
capitalistic  class.  The  war  has  ended  this  tradi- 
tion. The  wages  status  is  recognized  as  permanent. 
As  a  result  labor  sabotage  has  come  in.  It  is  a  re- 
sult of  our  land  policy  and  the  closing  of  opportunity 
to  men  to  work  for  themselves.  This  more  than 
anything  else  is  responsible  for  labor  unrest.  The 
pioneer  spirits  who  formerly  followed  adventure  to 
the  West  are  now  to  be  found  in  the  labor  movement. 

LAND   MONOPOLY 

We  assume  that  America  is  a  land  of  farm  owners; 
that  the  nation  is  divided  into  farms  of  from  fifty  to 
two  hundred  acres  each,  and  the  land  is  for  the  most 
part  under  cultivation.  Nobody  realizes,  and  few 
people  are  concerned  over  the  fact  that  this  is  not 
true.  The  total  cultivable  area  of  America  amounts 
to  841,000,000  acres.  This  is  about  four  times  the 
area  of  France.     Yet  in   1900,   over   200,000,000 

[44] 


acres  were  in  estates  which  exceeded  i,ooo  acres. 
Their  average  size  was  4,230  acres.  This  vast  do- 
main, nearly  as  large  as  Germany,  was  owned,  ac- 
cording to  census  reports,  by  less  than  50,000  people 
and  corporations.  It  is  owned  by  .0006  per  cent. 
of  our  population.  Many  of  these  estates  exceed 
a  hundred  thousand  acres;  many  equal  five  hundred 
thousand  acres;  some  of  them  exceed  the  million 
acre  mark.  The  states  of  Texas,  California,  Wash- 
ington, Montana,  and  parts  of  Colorado,  Kansas, 
Nebraska  and  the  Dakotas,  contain  great  manorial 
estates,  like  those  of  England,  Prussia,  Russia,  and 
Central  Europe.  They  are  worked  by  tenants,  or 
by  hired  hands.  Much  of  the  land  is  not  worked 
at  all.  The  hand  and  mind  of  man  is  denied  access 
to  a  great  part  of  this  vast  domain,  capable  of  main- 
taining millions  of  families  in  comfort. 

But  this  is  by  no  means  all.  Much  of  the  land 
enclosed  in  farms  is  not  cultivated.  It  too  is  held 
out  of  use.  The  dead  hand  of  sabotage  keeps  nearly 
half  of  the  cultivable  area  of  the  country  out  of 
cultivation.  According  to  the  census  reports  of 
19 10,  there  were  400,346,575  acres  of  land,  out  of 
the  878,798,325  acres  enclosed,  that  was  not  in  till- 
age. It  was  unimproved.  It  was  failing  to  pro- 
duce wealth. 

OPPORTUNITY    FOR   MORE    FARMS 

The  extent  to  which  we  have  sabotaged  opportuni- 
ties for  food  production,  is  indicated  by  the  fact  that 

[45] 


the  state  of  Texas  is  as  large  as  Germany  with  her 
70,000,000  people.  Switzerland  could  be  added 
and  these  two  countries  would  not  exceed  the  area  of 
a  single  American  state. 

The  population  of  the  United  States  in  19 10  was 
but  33  to  the  square  mile.  Little  Denmark,  in  many 
ways  the  most  prosperous  and  contented  country  in 
the  world,  supports  183  people  to  the  square  mile. 
France  supports  191  people,  Switzerland  234,  and 
Belgium,  a  bee-hive  of  industry,  a  population  of  671 
to  the  square  mile.  None  of  these  countries,  un- 
less it  is  France,  are  as  fertile  as  the  United  States; 
none  of  them  are  endowed  with  as  great  a  diversity 
of  climate,  and  all  of  them  are  more  or  less  ex- 
hausted by  centuries  of  cultivation.  There  is  no 
doubt  but  that  the  United  States  could  maintain  at 
least  500,000,000  people  in  comfort,  and  measured 
by  Belgium,  which  country  is  of  course  not  self-sup- 
porting, 2,000,000,000  people  could  be  cared  for 
within  our  borders.  If  our  agricultural  land  were 
opened  to  use  and  cultivated  as  it  is  in  countries 
where  peasant  proprietorship  prevails,  America 
would  provide  farms  for  tens  of  millions  of  families, 
while  a  system  of  home  ownership  would  increase 
our  production  of  food  to  an  almost  unlimited  ex- 
tent. Yet  we  are  to-day  confronted  by  the  pos- 
sibility that  in  a  few  years'  time  we  will  have  to 
import  food. 


[46] 


CITY    LAND 

We  have  sabotaged  our  city  dwellers  by  the  same 
unsocial  policy.  This  too  we  have  done  by  law. 
We  permit  men  to  speculate  in  building  sites;  to  hold 
them  out  of  use  entirely,  or  to  cover  them  with 
shacks.  By  so  doing  we  distort  our  cities  into  the 
misshapen,  tenement-ridden  hives  of  human  beings 
that  they  are.  The  slum  is  a  product  of  land  specu- 
lation. Monopoly  rents  are  traceable  to  the  limita- 
tion of  the  land  in  use.  The  suburbs  around  our 
cities  are  held  by  speculators  until  the  growth  of 
population  bursts  the  bonds  of  the  built-up  area  and 
carries  people  on  to  the  new  land,  which  is  given 
a  monopoly,  if  not  prohibitive  price,  by  the  neces- 
sities of  the  people.  We  think  of  New  York  City 
as  completely  built  upon.  We  see  only  the  tene- 
ments and  the  skyscrapers.  Yet  there  are  200,000 
building  lots  in  Greater  New  York  that  are  held  out 
of  use,  and  tens  of  thousands  of  other  lots  that  are 
covered  with  shacks  or  tax-earning  buildings.  Build- 
ing sites  are  held  so  high  that  they  prohibit  the  build- 
ing of  homes.  This  is  true  of  every  large  city. 
Our  house  famine  is  not  alone  a  house  famine.  It 
is  largely  a  land  famine. 

We  ourselves  have  sabotaged  the  land.  In  so 
doing  we  have  sabotaged  all  labor  and  industry. 
We  have  sabotaged  the  traditions  of  America. 
Land  sabotage  means  less  wealth,  it  means  fewer  op- 
portunities for  labor,  less  food,  less  fuel,  less  com- 

[47] 


fort.  It  means  fewer  houses,  fewer  conveniences, 
and  increased  rents.  It  means  tenancy  rather  than 
home  ownership.  Unless  checked  it  means  a  regres- 
sive, or  at  least  a  stationary  civilization.  For  the 
house  and  land  famine  is  reducing  the  birth  rate. 
It  increases  the  death  rate.  Man  cannot  live,  he  will 
not  reproduce  his  kind,  if  access  to  the  earth  is 
closed  against  him. 

IRON   ORE   MONOPOLIES 

Sabotage  of  the  land  is  the  most  costly  sabotage 
of  all.  It  is  also  the  most  pervasive.  It  is  not  con- 
fined to  agricultural  or  to  city  land.  We  permit  the 
United  States  Steel  Corporation  to  monopolize  the 
iron  ore  deposits  of  Minnesota  and  Wisconsin  and 
mine  only  so  much  ore  as  it  sees  fit  to  mine.  It  con- 
trols the  iron  ore  deposits  of  Tennessee  and  much  of 
the  coking  coal  of  western  Pennsylvania.  Most  of 
the  known  iron  ore  deposits  of  America  are  con- 
trolled by  a  half  dozen  corporations  which  form  the 
iron  and  steel  monopoly.  Competition  is  impossible 
without  the  assent  of  the  steel  trust.  It  determines 
how  much  iron  and  steel  products  shall  be  produced, 
and  what  the  public  shall  pay  for  them.  Steel  is 
King.  It  is  so  recognized  by  high  finance.  All  so- 
ciety is  dependent  on  steel.  It  controls  railroads  and 
battleships.  It  controls  the  distribution  of  water 
and  gas  within  our  cities.  It  determines  the  cost  of 
structural  steel,  which  in  turn  determines  how  much 
shall  be  used  for  building.     The  merchant  marine 

[48] 


of  the  world  is  scarcely  less  dependent  on  steel  than 
are  the  railroads,  while  docks,  harbors,  locomotives, 
cars,  the  great  machines  for  distributing  and  hand- 
ling freight,  the  tools  with  which  the  farmer  and 
the  artisan  works  —  every  industry,  all  society  in 
fact,  is  dependent  upon  iron  and  steel  for  its  life.^ 

Steel  is  the  monarch  of  industry.  The  autocratic 
power  of  the  steel  trust  is  traceable  to  its  control  of 
raw  materials.  This  control  is  sanctioned  by  so- 
ciety; it  is  approved  by  law.  We  have  permitted  a 
handful  of  men  to  control  the  resources  of  the  earth, 
and  by  so  doing  to  exclude  capital  and  labor  from 
entering  this  industry,  from  bringing  forth  wealth, 
except  as  such  activity  suits  the  will  of  a  single  cor- 
poration. 

TIMBER    MONOPOLY 

Lumber  is  also  basic  to  all  industry.  It  deter- 
mines the  numbers  and  cost  of  homes.  It  enters 
into  all  industrial  processes.  Yet  America  has  sabo- 
taged its  people  by  permitting  a  complete  investi- 
ture of  the  growing  timber  of  the  United  States  by  a 
handful  of  timber  monopolists.  The  United  States 
Bureau  of  Corporations  conducted  an  investigation 

iThc  United  States  Steel  Corporation  earned  net  earnings  in 
1918,  after  paying  ordinary  taxes  (but  not  war  taxes)  and  after 
deducting  $100,000,000  for  depreciation,  in  the  sum  of  $549,180,000. 
It  paid  in  wages  and  salaries  $452,663,524.  It  could  have  reduced 
the  price  of  every  ton  of  rolled  steel  by  $30  and  still  have  paid 
7%  on  all  its  stock  and  provided  for  all  interest  and  sinking  fund 
charges  as  well. 

[49] 


of  the  timber  monopoly  In  19 14.  It  showed  that 
1,694  timber  owners  held  over  one-twentieth  of  the 
land  area  of  the  entire  United  States,  from  the 
Canadian  to  the  Mexican  borders.  These  1,694 
holders  owned  105,600,000  acres.  This  is  an  area 
four-fifths  as  large  as  France;  it  is  more  than  two 
and  one-half  times  the  land  area  of  the  six  New 
England  states.  Sixteen  of  these  holders  owned  47,- 
800,000  acres,  or  nearly  ten  times  the  land  area  of 
New  Jersey.  Three  land  grant  railroads  alone  own 
enough  timber  land  to  give  15  acres  to  every  male  of 
voting  age  in  the  nine  western  states  where  almost 
all  their  holdings  lie. 

These  timber  holdings,  according  to  the  Govern- 
ment investigation,  are  further  interrelated  until 
of  eighty  per  cent,  of  the  privately  owned  timber, 
three  individuals  and  corporations  own  fourteen  per 
cent.,  nineteen  persons  own  two-fifths,  and  195  own 
nearly  one-half.  These  groups  again  are  interlocked 
by  community  stock  holdings  and  otherwise,  until 
they  act  in  all  essentials  as  a  unit.  They  deter- 
mine the  production  of  lumber.     They  fix  its  price. 

And  they,  like  the  coal  miners,  and  the  iron  ore 
monopolists,  sabotage  production.  They  limit  out- 
put by  preventing  competition  and  excluding  free  ac- 
cess to  the  land. 

GROUND    RENT 

Some  Idea  of  the  burden  which  society  has  heaped 
upon  itself  is  indicated  by  the  fact  that  the  ground 

[50] 


rentals  alone  of  the  land  underlying  New  York  City 
amount  to  at  least  $250,000,000  a  year.  This  is  in 
excess  of  $250  per  family.  This  is  a  tax  which  must 
be  paid  for  the  mere  right  to  live  in  the  city;  to 
work  or  to  carry  on  industry.  This  is  the  embargo 
which  the  land  speculators  impose  on  the  production 
of  wealth.  It  is  a  first  charge  on  life.  It  must  be 
paid  before  any  other  activity  is  possible.  Not  alone 
must  this  tax  be  paid,  but  a  great  part  of  the  land 
within  the  city  and  for  many  miles  around,  is  held 
at  such  prohibitive  figures  that  it  cannot  be  used  at 
all.  This  too  is  a  burden  on  society.  It  distorts  the 
city's  growth.  It  prohibits  expansion.  It  compels 
every  individual  to  travel  hundreds,  possibly  thou- 
sands of  unnecessary  miles  every  year,  because  of  the 
distorted  development  of  the  city.  Life  is  cramped, 
while  rent  for  such  land  as  is  improved  is  increased 
to  the  point  of  herding  men  and  women  like  cattle 
in  stalls. 

Society  is  impoverishing  itself  by  this  land  policy. 
It  embargos  all  industry.  It  denies  us  homes,  farms 
and  food  and  fuel.  It  limits  the  size  of  families,  and 
affects  the  morals,  the  health  and  even  the  marriage 
rate  of  our  people. 


[51] 


CHAPTER  VI 

CREDIT 

Wealth  production  is  controlled  by  credit.  Credit 
determines  the  freedom  and  expansiveness  of  all  in- 
dustry. It  determines  what  industries  shall  live  and 
what  not;  who  shall  receive  assistance  and  who  not. 
The  manufacturer  and  the  mine  operator  need  credit 
to  pay  wages;  to  buy  materials.  They  need  it  to 
carry  on  business  until  they  can  realize  from  their 
sales.  The  farmer  needs  credit  to  plant,  to  harvest, 
to  market  his  produce.  Through  credit  the  manu- 
facturer and  the  farmer  change  their  wealth  into 
new  forms  so  that  industrial  processes  may  be  com- 
pleted.    These  are  the  functions  of  credit. 

Land,  transportation  and  credit  are  the  masters 
of  the  economic  life  of  a  country.     They  control  it. 

EARLY    BANKING 

The  bank  is  the  instrument  for  supplying  credit. 
It  receives  deposits.  It  makes  loans.  This  was  the 
sole  function  of  banking  for  two  and  a  half  centuries. 
Banking  was  local.     The  banker  kept  the  monev  of 

[52] 


his  neighbors  and  extended  credit  to  them  as  well. 
He  kept  a  small  reserve  in  some  larger  town  for 
the  clearance  of  checks  and  drafts. 

Competition  played  freely  between  banks.  Usury 
was  not  the  rule.  Interest  rates  were  controlled  by 
competition,  by  public  opinion  and  the  laws.  The 
banker  was  almost  as  local  in  his  outlook  as  was  the 
blacksmith,  the  storekeeper,  and  the  factory  owner 
who  supplied  the  communities'  needs.  Credit  was 
not  a  serious  cost  to  industry.  It  was  open  to  all  on 
equal  terms.  The  bank  was  not  an  exploiting 
agency.  It  was  used  to  aid  production,  to  encourage 
men  of  ability,  and  to  stimulate  the  industrial  life 
of  the  community. 

Banking  has  been  profoundly  changed  in  recent 
years.  It  is  no  longer  a  free  agency.  Credit  is  no 
longer  open  to  all  on  equal  terms.  Bank  directors 
are  directors  and  stockholders  in  local  industries. 
They  are  owners  of  stores,  mills  and  factories. 
Controlling  credit,  they  control  the  opportunities  of 
other  men  to  enter  fields  already  occupied  by  those 
who  control  the  banks.  In  almost  every  town,  in- 
dustry and  credit  are  under  the  control  of  a  group 
of  men  who  have  already  established  their  position 
in,  if  not  their  control  of,  the  industrial  life  of  the 
community. 

CONCENTRATION   OF    CREDIT 

Banking  and  credit  have  also  ceased  to  be  local. 
This  is  the  most  serious  evil  of  all.     The  banking, 

[53] 


savings  and  trust  institutions  of  the  country  are  in- 
terlaced in  countless  ways  with  the  great  financial 
institutions  of  New  York,  which  institutions  are  con- 
trolled by  two  great  banking  groups,  whose  ramifi- 
cations, connections  and  control  and  the  methods 
which  they  employ,  were  described  in  detail  in  the 
Report  of  the  Pujo  Committee  of  Congress  in  1913.^ 
Practically  all  of  the  banks  in  New  York  City,  which 
is  the  money  reservoir  of  America  and  of  the  world, 
are  under  the  control  of  a  small  number  of  men. 
So  are  the  insurance  companies  with  their  huge  res- 
ervoirs of  funds.  These  men  often  own  stock  in  or 
influence  the  policy  of  the  banks  and  trust  companies 
in  Boston,  Philadelphia,  Chicago,  Pittsburgh,  Cleve- 
land, St.  Louis  and  the  Pacific  Coast.  They  in- 
fluence the  banking  institutions  in  the  smaller  towns; 
sometimes  through  ownership  of  stock,  more  fre- 
quently through  the  control  of  opportunities  of  profit 
which  the  banks  in  New  York  are  able  to  offer  the 
other  banks  of  the  country.  Banking  is  in  effect  a 
nation-wide  monopoly  closely  bound  together  by  a 
community  of  interest.^ 

The  New  York  banks  make  the  financial  and  in 
a  measure  the  political  opinion  of  the  country.     They 

1  See  Committee  to  Investigate  the  Concentration  of  Control  of 
Money  and  Credit,  H.  of  R.  Report  1593. 

2  The  New  York  banks  are  opposed  to  the  development  of  new 
railroads,  mines  or  industries  which  compete  with  those  which  they 
already  own.  Through  their  nation-wide  ramifications  they  close 
avenues  of  credit  to  competing  enterprises.  They  exercise  a  feudal 
control  of  our  industrial  life. 

[54] 


do  this  through  circulars,  through  daily  announce- 
ments in  the  press,  and  through  press  control. 

THE   MONEY    MONOPOLY 

Banking  has  become  an  investment  business.  The 
Eastern  banks  underwrite  billions  of  securities  each 
year.  Not  alone  the  securities  of  industrial  and 
railroad  corporations,  but  public  loans  of  the  United 
States  and  foreign  countries.  They  underwrite 
these  securities  at  a  fixed  price,  low  enough  to  enable 
them  to  pass  them  on  to  other  banks  to  which  they 
allot  a  portion  of  the  issue.  The  inland  banks  buy 
the  securities  at  a  figure  fixed  in  New  York,  and  sell 
them  to  their  customers  at  a  higher  price.  Instead 
of  being  banks  they  are  merchants.  They  buy  at  a 
low  price  and  sell  at  an  advanced  price.  They  make 
substantial  profits  from  this  source.  They  are  part 
of  a  nation-wide  agency  for  the  sale  of  securities  of 
the  railroads,  public  utility  corporations,  mines  and 
industrial  trusts.  In  this  way  they  are  dependent 
upon  the  good  will  of  Wall  Street  bankers.  If  they 
do  not  accept  such  underwritings  as  are  offered  them, 
they  may  be  deprived  of  other  opportunities  for 
gain. 

In  this  way  the  securities  of  railroads,  trusts, 
mines,  and  industries  are  sold  to  the  public.  In  this 
way  foreign  loans,  both  to  Europe  and  to  weak  and 
dependent  countries,  are  distributed.  By  this  means 
the  inland  banks  are  identified  with  the  mainte- 
nance of  the  status  quo,  and  of  monopoly  interests 

[55] 


generally.  Competition  is  a  menace  to  the  estab- 
lished order.  So  is  freedom  of  production.  Credit 
is  organized  to  maintain  a  security  structure  that  is 
based  upon  monopoly  and  the  inflated  prices  which 
monopoly  must  exact  to  sustain  the  security  issues 
that  have  been  placed  upon  the  market.  Financial 
imperialism  is  promoted  by  the  financial  interests, 
as  is  the  demand  for  a  large  army  and  a  powerful 
navy.  The  agitation  for  intervention  in  Mexico  is 
largely  inspired  by  American  interests  with  invest- 
ments in  that  country  that  are  distributed  among  the 
bankers  and  the  financiers  in  the  credit  centers  of  the 
country. 

Our  banking  and  credit  agencies  have  become  sub- 
sidiary of  a  new  type  of  financial  capitalism  that  is 
not  primarily  interested  in  the  development  of  in- 
dustry, in  the  production  of  wealth,  or  in  the  promo- 
tion of  the  local  community.  Rather,  they  are  op- 
posed to  free  production.  They  are  opposed  to  new 
projects,  new  railways,  more  mines,  cheap  food. 
Our  banking  agencies  are  interested  in  maintaining 
the  status  quo.  They,  with  the  railroads,  are  the 
main  support  of  the  scarcity  philosophy. 

PROMOTING   SPECULATION 

Through  this  interlacing  of  interests,  the  deposits 
of  105,000,000  people  are  drawn  from  their  respec- 
tive communities  and  lodged  in  the  money  centers 
and  especially  in  New  York.  They  are  used  for 
speculation,  stock  gambling,  the  underwriting  of  se- 

[56] 


curities,  the  flotation  of  foreign  loans.  It  is  the 
banks  that  make  possible  the  hoarding  of  food,  of 
sugar,  wool,  and  raw  materials  of  all  kinds.  It  is 
the  denial  of  credit  to  farmers  and  producers  that 
prevents  the  farmers  from  being  their  own  ware- 
housers  and  from  realizing  on  the  most  advantageous 
market. 

Inland  banks  keep  credit  balances  in  Wall  Street. 
They  amount  to  colossal  sums.  Through  these 
balances  they  are  permitted  to  participate  in  under- 
writing syndicates.  They  make  more  money  on  call 
loans  used  for  speculation  on  the  Stock  Exchange 
than  they  do  from  commercial  loans  to  customers. 
It  is  the  investment  and  speculative  feature  of  met- 
ropolitan banking  that  lures  the  credit  resources  of 
the  country  from  the  centers  of  production  and  di- 
verts them  from  local  industry,  from  the  upbuilding 
of  agriculture,  and  the  development  of  the  country.^ 

OUR    COLOSSAL    CREDIT   RESOURCES 

Credit  in  America  should  be  abundant.  Interest 
rates  should  be  low.  There  should  be  easy  loans 
for  the  farmer,  for  the  business  man,  for  the  manu- 

^  We  get  some  suggestion  of  the  power  of  banking  institutions 
when  we  contemplate  their  resources.  They  amount  to  $45,000,- 
000,000  or  one  fifth  of  the  total  estimated  wealth  of  the  nation. 
There  are  19,000,000  depositors  in  the  national  banks  alone  whose 
gross  earnings  in  191 9  were  over  $900,000,000.  Despite  the  fact 
that  America  is  the  credit  reservoir  of  the  world,  despite  the 
colossal  reservoirs  of  the  banks  and  insurance  companies,  there  is 
to-day  scarcely  any  money  to  be  had  for  the  building  of  homes, 
for  easy  relief  for  the  farmer   and  no  credit  at  all  for  the  man 

[57] 


facturer,  for  the  home  builder,  for  any  legitimate 
enterprise.  America  has  become  the  credit  reser- 
voir of  the  world.  The  federal  reserve  act  widened 
the  foundations  of  credit  so  as  to  make  wealth 
rather  than  gold  the  basis  for  bank  loans,  while  the 
power  to  issue  federal  reserve  notes  makes  tight 
money  impossible.  According  to  the  report  of  the 
Comptroller  of  the  Currency  for  the  year  19 19  the 
banking  power  of  the  United  States  at  this  time  "  is 
three  times  as  great  as  the  total  banking  power  of 
the  entire  world  in  1890  as  estimated  by  Mulhall 
at  $15,585,500,000.  The  banking  power  of  the 
United  States,  according  to  Mulhall's  estimate  in 
1890,  was  only  $5,150,000,000.  Our  banking 
power  is,  therefore,  to-day  about  nine  times  what  it 
was  just  thirty  years  ago." 

Continuing,  the  Comptroller  says :  "  The  so 
called  Banking  Power  of  the  United  States  in  June, 
19 1 9,  as  expressed  by  the  capital,  surplus,  profits, 
circulation  and  deposits  of  all  national  banks  and  all 
reporting  state  banking  institutions,  including  trust 
companies,  together  with  the  estimated  amount  of 
such  funds  in  non  reporting  state  banks,  plus  the  capi- 
tal, surplus,  government  and  reserve  deposits  and 
circulation  of  the  Federal  Reserve  Banks  as  of  June 
30,  1919,  was  $45,756,300,000.^ 

"  This  represents  an  increase  in  the  banking  power 

who  needs  credit  most,   the  man   who  has   only  his  character  and 
personal   integrity  with   which  to  back  a  loan. 

^  For    the    fiscal    year    1920    the    banking    resources    were    over 
$53,000,000,000. 

[58] 


of  the  United  States  over  June  30,  19 18,  of  $6,673,- 
500,000."  ^ 

This  is  the  banking  credit  power  of  the  country. 
It  is  three  times  the  banking  resources  of  the 
world  thirty  years  ago  and  nine  times  the  total  bank- 
ing power  of  this  country  thirty  years  ago. 

With  this  colossal  credit  reservoir  there  should 
be  credit  for  every  legitimate  need.  Banks  should 
be  seeking  borrowers;  they  should  be  going  out  to 
the  farmer  and  the  business  man;  they  should  be 
developing  new  industries,  building  new  homes,  ex- 
panding our  productive  powers  In  every  way.  Yet 
the  reverse  is  true.  And  conditions  seem  to  be 
growing  worse  rather  than  better.  During  the 
summer  and  fall  of  19 19  the  farmers  of  the  West 
were  sending  frantic  appeals  to  the  East  for  credit 
with  which  to  save  their  crops  from  loss.  The 
building  of  houses  has  stopped.  Industries  have 
been  shut  down  and  certain  kinds  of  merchandising 
has  been  almost  ruined  by  the  refusal  of  the  banks 
to  grant  loans.  Yet  while  this  condition  prevails  as 
to  productive  industry  the  Comptroller  of  the  Cur- 
rency issues  a  protest  to  the  banks  of  New  York 
against  the  usurious  interest  they  are  charging  for 
call  money,  which  he  states  has  gone  up  to  sixteen 
and  even  twenty  per  cent.  His  open  letter  to  the 
press  of  August  10,  19 19,  stated  that  at  least  a 
billion  dollars  was  being  used  for  call  loans  in  New 
York,  which  means  that  it  is  being  used  for  specula- 

1  Report  of  Comptroller  of  the  Currency,  1919,  p.  16. 

[59] 


tion  on  the  Stock  Exchange.  This  does  not  include 
the  billions  used  for  other  kinds  of  speculation  not 
only  in  New  York  but  all  over  the  country.  For 
some  reason  or  other  with  all  of  this  credit  at  our 
disposal,  with  banking  resources  many  times  greater 
than  we  ever  enjoyed  before,  with  our  banking  laws 
adjusted  to  the  creation  of  unlimited  credit,  there 
is  little  or  no  credit  for  those  who  produce  wealth 
and  for  those  who  need  it  most  to  keep  us  in  food, 
in  houses  and  in  the  necessities  of  life. 

Banking  and  credit  have  been  divorced  from  their 
earlier  and  proper  purposes.  Credit  has  ceased  to 
be  primarily  a  local  agency.  It  has  become  an 
agency  of  exploitation  and  monopoly.  Our  banks 
fail  to  perform  the  function  for  which  they  were 
chartered;  the  functions  that  give  them  a  reason  for 
existence  at  all.  Once  the  banks  become  investors 
in  the  securities  of  railroads,  public  utility  corpora- 
tions, mines,  the  steel  trust,  the  packing  trust,  the 
sugar  trust  and  scores  of  other  great  industries,  they 
Insensibly  resist  any  new  projects  or  any  new  ven- 
tures that  are  discredited  by  Wall  Street  or  that 
threaten  the  securities  in  which  they  have  invested. 
The  banks  thus  aim  to  maintain  monopoly.  They 
too  sabotage  production.  They  refuse  to  encourage 
local  initiative,  new  enterprises  or  the  production  of 
wealth.  They  too  are  identified  with  a  scarcity  phil- 
osophy. 

Quite  as  important,  the  banks  of  the  country  resist 
political  change  that  seeks  to  regulate  or  control 

[60] 


any  of  these  interests.  They  have  become  part  of  a 
nation-wide  political  system  that  takes  its  opinions 
from  the  money  centers  of  the  country.  They  in- 
fluence the  local  press.  They  are  influential  in  mak- 
ing nominations  to  the  state  legislature  and  to  Con- 
gress. They  contribute  to  campaign  funds.  They 
oversee  political  parties,  their  platforms,  and  the 
opinions  of  the  men  who  may  be  nominated  for  any 
public  position. 

CREDIT   CONTROLS   INDUSTRY 

While  land  monopoly  and  the  ownership  of  our 
resources  controls  the  production  of  wealth,  while 
transportation  strangles  and  sabotages  any  industry 
that  competes  with  those  industries  which  the  rail- 
road owners  control;  while  it  is  to  the  interest  of 
the  major  industries  to  limit  production  in  order  to 
secure  a  monopoly  price ;  the  banking  and  credit 
agencies  sabotage  industry  at  the  source.  They  de- 
termine who  shall  enter  industry  and  who  shall  not. 
They  do  not  permit  their  funds  to  be  freely  used  for 
such  useful  purposes  as  the  building  of  homes. 
There  are  no  agencies  for  the  ending  of  farm  ten- 
ancy and  the  encouragement  of  farm  ownership 
such  as  exist  in  Denmark,  Australia  and  Ireland. 
There  are  no  banks  or  government  agencies  for  the 
promotion  of  farm  ownership,  or  the  encouragement 
of  building.  There  is  no  credit  for  the  tenant  or 
the  worker.  Mere  moral  security  is  dependent 
largely  on  the  usurer  and  loan  shark. 

[6i] 


American  banking  is  used  largely  for  speculation. 
It  is  used  for  the  protection  and  strengthening  of 
those  who  already  own  rather  than  for  the  en- 
couragement of  those  who  have  only  their  labor, 
their  imagination  and  their  initiative  to  offer.  Yet 
a  real  banking  system  should  encourage  the  man 
without  capital  or  with  little  capital.  It  should  ac- 
cept moral  risks.  It  should  develop  new  industries 
and  unused  resources.  It  should  seek  out  the  man 
of  talent  and  extend  such  aid  as  can  properly  be 
offered  to  him. 

For  generations  banking  performed  these  services. 
It  is  only  by  such  a  union  of  capital  and  labor  that 
surplus  wealth  is  created.  The  land  is  broken, 
homes  are  built,  industry  is  started.  But  a  definite 
turn  in  the  tide  occurred  with  the  monopoly  of  in- 
dustry in  the  closing  years  of  the  last  century. 
Then  the  banks  became  part  of  a  nation-wide  con- 
solidation and  financial  control  of  transportation,  of 
industry  and  credit,  and  they  have  continued  to  sus- 
tain this  system  ever  since.  To-day  they  are  the 
antennas  reaching  out  from  New  York  which  shape 
and  control  our  economic  life  and  our  political,  social 
and  intellectual  opinions  as  well.  America  works, 
America  produces  and  America  thinks,  much  as  those 
who  control  our  credit  decree.  They  are  the  ulti- 
mate arbiters  of  our  economic  as  they  are  of  our 
political  life. 

,      162] 


CHAPTER  VII 

ALIEN  CAPITALISM 

Alien  capitalism  Is  the  final  step  In  the  evolution 
of  sabotage.  By  alien  capitalism  I  mean  the  export 
of  credit  and  capital  to  foreign  countries,  either  in 
the  form  of  loans,  or  for  the  building  of  railroads 
and  public  utility  corporations,  the  exploitation  of 
mines,  the  development  of  timber  preserves,  planta- 
tions, and  other  natural  resources. 

Alien  capitalism  Is  the  Inevitable  consequence  of 
the  accumulation  of  surplus  wealth,  so  called,  and 
the  monopoly  of  opportunities  for  exploitation  in  the 
home  country.^  Surplus  wealth  springs  largely  from 
monopoly  profits.  It  is  accumulated  by  the  banks 
and  used  by  the  banks  for  private  profit  rather  than 
national  service.  Privilege  first  secures  control  of 
the  resources  of  the  home  country  and  then  strikes 

1  There  is  no  such  thing  as  surplus  wealth  and  there  is  no  coun- 
try, not  even  Great  Britain,  that  does  not  need  all  of  the  capital 
that  is  invested  in  other  countries.  There  can  only  be  a  surplus 
of  wealth  after  the  people  are  decently  housed,  clothed  and  fed, 
and  all  of  their  proper  wants  are  provided  for.  We  are  export- 
ing billions  of  capital  but  there  is  little  money  or  credit  for  aid 
to  our  own  people. 

[63] 


out  to  conquer  other  lands  where  even  larger  profits 
are  possible.  Capital  is  exported  not  because  it  can- 
not be  invested  profitably  at  home,  but  because  it 
can  be  invested  more  profitably  abroad. 

From  the  Civil  War  to  the  end  of  the  century, 
America  was  a  debtor  nation.  Her  railroads  and 
resources  were  developed  by  European  capital.  The 
extraordinary  richness  of  the  country  enabled  us  to 
speedily  liquidate  these  loans  and  build  up  a  huge 
surplus  capital  in  a  few  years'  time.  This  surplus 
was  lodged  with  the  banks,  which  in  turn  used  it  for 
the  acquisition  and  monopolistic  control  of  the  basic 
industries  and  transportation  agencies  of  the  country. 

The  Great  War  liquidated  our  foreign  debts.  It 
made  us  a  creditor  nation  on  a  large  scale.  Over 
forty  per  cent,  of  the  gold  of  the  world  was  drawn 
to  America  in  payment  of  foreign  obligations,  while 
our  banking  resources  at  the  end  of  the  war  exceeded 
the  combined  banking  resources  of  the  imperial  and 
national  banks  of  all  of  the  other  great  nations.  At 
the  time  of  the  armistice  we  were  not  only  a  creditor 
nation,  we  were  the  only  nation  in  a  position  to  ex- 
tend credit  to  other  countries  and  to  reach  out  for 
the  exploitation  of  the  world. 

ENGLAND,    FRANCE   AND   GERMANY 

The  United  States  has  passed  through  the  same 
economic  evolution  as  England,  France  and  Ger- 
many. England  was  the  first  great  creditor  nation, 
as  England  was  the  first  country  to  develop  industry 

[64] 


and  commerce.  Her  overseas  investments  at  the 
outbreak  of  the  war  amounted  to  twenty  billion 
dollars.  France  Is  also  a  creditor  nation.  Her 
overseas  investments  amounted  to  over  nine  billion 
dollars.  Germany  became  a  creditor  nation  in  the 
decade  which  preceded  the  Great  War.  Her  for- 
eign investments  amounted  to  six  billion  dollars. 
Each  of  these  nations  in  turn  was  led  into  imperial- 
istic undertakings  and  the  exploitation  of  weaker 
people  as  a  result  of  alien  capitalism.  Great  Britain 
was  drawn  into  Egypt,  South  Africa,  Persia,  China, 
Central  and  South  America,  as  well  as  her  colonies. 
The  expansion  of  the  British  Empire  was  largely  the 
result  of  the  growth  of  overseas  interests  and  the 
demand  on  the  part  of  the  investing  classes  that 
political  power  should  follow  their  investments. 
French  capital  penetrated  into  Algiers,  Tunis  and 
Morocco.  It  was  invested  in  Russia,  Turkey,  the 
Balkan  States,  and  Central  Africa.  The  surplus 
capital  of  Great  Britain  was  drawn  from  ground 
rents  of  the  aristocracy  and  the  profits  of  the  manu- 
facturing, shop-owning  and  commercial  classes. 
The  surplus  wealth  of  France  came  from  the  petty 
savings  of  the  peasants,  which  was  mobilized  by  the 
Paris  banks,  which  loaned  it  to  other  governments 
or  used  it  for  exploitation  purposes  in  foreign  lands. 
Germany  adopted  and  perfected  the  methods  em- 
ployed by  England  and  by  France.  Through  inter- 
national banks,  of  which  the  Deutsche  Bank  was  the 
chief,  she  penetrated  rapidly  into  countries  where 

[65] 


British  and  French  capital  had  already  found  lodge- 
ment. She  came  into  conflict  with  England  and 
France  in  Turkey,  Asia  Minor  and  Mesopotamia. 
Her  investments  in  these  regions,  and  especially  the 
Bagdad  railway,  was  a  menace  to  the  British  Em- 
pire. Germany  conflicted  with  France  in  Morocco, 
and  the  Morocco  incident  of  191 1,  which  nearly 
precipitated  war  at  that  time,  was  a  result  of  the 
warring  claims  of  German  and  French  concession 
seekers  and  bankers  which  came  in  conflict  not  only 
in  the  making  of  the  public  loans,  but  in  the  securing 
of  iron  ore  concessions  as  well.  Alien  capitalism  is 
the  forerunner  of  imperialism.  It  has  always  been 
so. 

IMPERIALISM 

The  investing  classes  in  America  are  now  politi- 
cally ascendant,  as  they  were  in  England,  France 
and  Germany.  The  foreign  investor  demands  an 
aggressive  foreign  policy  and  the  use  of  diplomacy 
for  the  securing  and  protection  of  loans  and  conces- 
sions. He  demands  that  the  flag  shall  follow  his 
investments,  and  in  furtherance  of  such  demands  in- 
sists upon  a  large  navy  and  a  sufficiently  large  army 
to  enforce  his  claims.  International  usage  sanctions 
the  right  of  a  creditor  nation  to  use  force  for  the 
securing  of  concessions  and  their  maintenance  once 
they  have  been  secured.  It  sanctions  intervention 
in  weak  countries,  the  overthrow  of  governments, 
the  fomenting  of  revolutions,  and  the  use  of  intrigue 

[66] 


and  power  in  the  interest  of  its  foreign  investors. 
We  see  alien  capitalism  at  work  in  Mexico  to-day, 
in  which  country  American  investors  have  claims 
aggregating  nearly  a  billion  dollars.  These  claims 
are  in  oil  wells,  copper  mines,  plantations,  railroads 
and  other  investments  of  a  monopolistic  sort. 

MENACE   TO   DOMESTIC   DEVELOPMENT 

Alien  capitalism  is  a  most  serious  check  to  domestic 
development.  It  exports  capital  that  should  be  in- 
vested at  home.  France  was  greatly  weakened  by 
the  export  of  capital.  Money  that  should  have 
been  used  for  the  expansion  of  the  railroads,  the 
development  of  waterways  and  industry  found  its 
way  into  other  countries.  The  same  is  true  of  Great 
Britain.  The  poverty  of  her  people,  the  decay  of 
agriculture,  the  shortage  of  homes  and  the  relative 
impairment  of  her  industry,  is  traceable  to  the  export 
of  capital  to  countries  where  higher  rates  of  interest 
are  obtainable,  where  wages  are  low  and  human 
labor  along  with  natural  resources  are  open  to  ex- 
ploitation. 

Our  own  industrial  development  is  now  menaced 
by  the  lending  of  billions  of  credit  to  other  countries. 
Our  railroads  need  billions  of  dollars  for  their 
proper  extension.  The  same  is  true  of  our  water- 
ways. The  country  is  in  need  of  vast  hydro-electric 
development,  which  would  enable  us  to  save  fuel, 
operate  our  industries  and  railways,  light  our  towns 
and  substitute  the  white  coal  of  our  rivers  for  the 

[67] 


black  coal  of  the  pits.  There  is  need  of  a  million 
houses  and  as  many  farms.  But  we  cannot  use 
capital  abroad  and  at  home  at  the  same  time.  The 
export  of  capital  starves  agriculture.  It  increases 
interest  rates.  It  limits  our  supply  of  houses  and 
creates  monopoly  conditions  and  with  them  monopoly 
rents.  Billions  of  dollars  should  be  spent  to-day  for 
the  better  housing  of  our  people,  while  hundreds  of 
millions  more  should  be  used  in  the  opening  of  our 
lands,  the  encouragement  of  agriculture,  the  building 
of  roads  and  the  bringing  of  the  country  to  a  proper 
state  of  development.  America  has  scarcely 
scratched  her  resources;  the  productive  power  of 
labor  could  be  greatly  increased  by  additional  capital 
investment.  Our  resourcefulness  and  productive 
capacity  would  be  greatly  stimulated  if  the  surplus 
wealth  accumulated  during  the  war  were  used  for 
our  own  purposes  rather  than  for  the  development 
of  backward  countries  in  which  high  and  usurious 
interest  rates  can  be  obtained. 

The  export  of  capital  lowers  wages  by  reducing 
opportunities  for  labor.  It  reduces  the  demand.  It 
thus  reduces  wages.  Alien  capitalism  is  not  only  a 
menace  to  our  industrial  development;  it  is  a  menace 
to  the  wage-working  population  and  to  the  whole 
consuming  public. 

ECONOMIC    SABOTAGE 

Alien  capitalism  is  the  final  step  in  economic 
sabotage.     It  makes  its  appearance  with  the  monop- 

[68] 


oly  of  resources  at  home;  the  control  of  natural  re- 
sources by  the  banking-exploiting  group,  and  the 
opening  of  opportunities  for  the  acquisition  and  ex- 
ploitation of  similar  resources  in  other  lands.  Un- 
der natural  conditions,  surplus  wealth  means  a  fall- 
ing interest  rate.  It^  means  cheap  money  and  abun- 
dant credit.  Falling  interest  rates  would  stimulate 
industry,  encourage  new  projects,  and  reduce  the  cost 
of  living.  Alien  capitalism  is  thus  at  war  with  the 
best  interests  of  the  country.  It  is  anti-social.  It 
is  an  agency  of  the  exploiting  classes  for  increasing 
their  economic  power. 

Alien  capitalism  is  a  foe  to  labor,  to  industry,  to 
agriculture,  and  to  the  peace  of  the  nation  as  well. 
For  alien  capitalism  leads  to  imperialism.  Imperial- 
ism leads  to  an  increasing  military  and  naval  estab- 
lishment. Imperialism  ultimately  leads  to  war,  as 
it  has  all  over  the  world  during  the  last  thirty  years. 
Imperialism  in  other  countries  has  been  followed  by 
national  decay.  This  was  the  experience  of  Rome, 
of  Spain,  of  Portugal,  of  the  Hanseatic  League. 
In  the  nineteenth  century,  it  was  the  experience  of 
France,  England,  Germany,  Austria-Hungary,  and 
Russia.  Alien  capitalism  and  imperialism  are  the 
gravest  menace  to  America.  They  are  the  natural 
and  inevitable  consequences  of  the  ascendancy  of 
privilege  in  our  economic  and  political  life. 


[69] 


CHAPTER  VIII 

OPINION 

The  opinions  of  a  country  reflect  the  will  of  the 
class  that  owns.  We  think  as  we  are  directed  to 
think.  We  believe  the  things  we  are  told  to  be- 
lieve. This  is  true  of  politics,  of  economic  questions. 
It  is  true  of  war  and  of  imperialism.  It  is  true  of 
labor  and  morals.  Our  opinions  mirror  the  inter- 
ests of  economic  classes  that  control  the  thought- 
molding  agencies  and  make  them  serve  their  will. 

This  has  been  true  from  the  beginning.  Up  to 
about  i860,  the  most  characteristic  thing  about 
America  was  economic  equality.  Man  worked  for 
himself.  He  usually  owned  his  own  farm  and  his 
own  home.  He  owned  his  own  tools.  He  knew  no 
boss,  no  master.  There  was  no  landlord  and  no 
capitahst  class. 

EARLY    IDEALS 

As  a  people  we  believed  in  economic  freedom  and 
equality  of  opportunity.  Laissez  faire,  "  let  us 
alone,"  was  the  rule  of  industry.  We  commanded 
the  Government  to  keep  hands  off,  to  interfere  as 

[70] 


little  as  possible  with  our  daily  life,  with  our  opinions, 
religious,  political,  social. 

We  cherished  political  liberty.  It  enjoyed  almost 
religious  veneration.  Like  crusaders,  we  wished  to 
extend  it  to  all  subject  people;  to  Ireland,  Russia 
and  Poland.  America  was  the  asylum  not  only  to 
the  oppressed;  it  was  the  asylum  of  those  who  sought 
to  establish  a  government  abroad  as  free  as  our  own. 
We  were  hospitable  to  revolutionary  opinions  and 
to  revolutionary  leaders.  We  had  no  fear  of  old 
world  disturbances.  We  opened  our  arms  to  Kos- 
suth, Garibaldi,  Carl  Schurz,  to  the  revolutionists 
of  Russia,  Poland,  and  Central  Europe. 

A  people  where  economic  equality  is  the  rule  has 
no  fear  for  its  institutions.  It  has  no  fear  for  prop- 
erty. A  free  people  is  hospitable  to  new  ideas. 
The  repressive  spirit  is  a  by-product  of  fear  born 
of  privileged  wealth. 

THE    FEDERAL    CONSTITUTION 

The  people  accepted  the  Federal  Constitution  on 
very  definite  conditions.  They  feared  government 
as  government.  They  made  reservations  before 
they  approved  of  the  Constitution.  They  insisted 
that  the  individual  should  be  guaranteed  forever  in 
his  liberties.  They  insisted  that  freedom  of  speech, 
freedom  of  the  press,  freedom  of  assemblage,  and 
the  right  to  jury  trial  and  the  writ  of  habeas  corpus 
should  be  written  into  the  Constitution  before  they 
would  accept  it.     These  were  the  first  amendments 

[71] 


adopted.  They  were  conditions  precedent.  They 
constitute  the  Bill  of  Rights.  To  those  who 
adopted  it,  the  Constitution  was  not  primarily  a 
form  of  government;  it  was  a  guarantee  of  personal 
rights.  When  men  talk  of  attempts  to  overthrow 
the  Constitution  they  are  talking  about  something 
else  than  the  Constitution.  For  the  Constitution 
is  not  an  enumeration  of  powers,  of  the  method  of 
electing  the  President  and  Congress;  the  Constitu- 
tion is  an  enumeration  of  rights  which  the  Ameri- 
can people  sought  to  make  inviolate.  The  alleged 
revolutionary  groups  of  to-day  are  in  the  main  fight- 
ing for  the  Constitution,  not  making  war  on  it. 

America  came  into  being  to  insure  the  natural 
rights  that  should  inhere  in  every  human  being. 
That  was  what  the  state  meant  to  the  colonists.  It 
was  a  guardian  of  rights;  not  a  form  of  government. 

The  people  expressed  their  resentment  to  any  other 
conception  of  the  state  in  their  repudiation  of  the 
Federalist  Party  and  the  Alien  and  Sedition  Laws 
enacted  by  it.  They  swept  the  Federalist  Party  out 
of  office.  It  never  came  back  to  life.  Down  to 
the  Civil  War,  individual  freedom,  hands  oft  by  the 
Government,  was  the  dominant  note  in  our  political 
life.  The  rights  guaranteed  by  the  Constitution 
were  jealously  guarded  by  the  courts,  by  Congress, 
by  the  press,  by  public  opinion.  There  was  an  al- 
most religious  adoration  of  liberty,  save  negro 
slavery,  in  all  of  its  forms.  This  was  the  most 
symptomatic  thing  of  our  civilization. 

[72] 


POLITICAL    FREEDOM 

This  psychology  of  freedom  was  a  by-product  of 
economic  equality.  There  were  no  special  privi- 
leges; no  law-made  wealth.  What  one  man  pos- 
sessed was  open  to  others  to  acquire.  And  a  society 
based  on  labor  values  is  of  necessity  a  society  of 
equality  and  of  liberty  as  well. 

During  these  years,  public  opinion,  the  press,  the 
universities,  the  textbooks  on  political  science,  were 
highly  individualistic.  Competition,  it  was  said, 
was  the  life  of  society.  To  challenge  this  was 
heresy.  Legislation  mirrored  this  psychology.  We 
accepted  with  approval  the  philosophy  that  issued 
from  England  with  the  support  of  Adam  Smith, 
Ricardo  and  the  political  economists  of  that  country, 
that  the  best  possible  society  was  a  society  in  which 
competition  was  allowed  to  play  freely  in  all 
economic  relations.  This  philosophy  in  turn  was  a 
reflection  of  the  economic  life  in  which  we  lived. 
It  was  a  reflection  of  the  economic  desires  of  the 
dominant  class  in  the  state. 

THE    CIVIL    WAR 

The  Civil  War  changed  economic  conditions.  It 
definitely  ended  the  old  order.  The  protective 
tariff  gave  birth  to  exotic  industry.  War  necessities 
led  to  the  National  Bank  Act.  The  Pacific  rail- 
roads secured  valuable  land  grants,  while  corrupt- 
ing influences  identified  themselves  with  privileges, 

[73] 


which  came  into  existence  through  the  aid  of  the 
Government.  The  special  privileges  created  by 
Congress,  the  states  and  cities  increased  in  value  as 
the  country  grew  in  population  and  wealth.  To 
protect  their  privileges  these  interests  entered  poli- 
tics. They  sought  to  control  the  Government  in 
order  to  strengthen  the  grants  they  had  acquired 
from  the  Government.  And  they  found  a  national 
philosophy  ready  made  to  support  them.  It  was 
the  philosophy  of  laissez  faire,  let  industry  alone. 
"  Hands  off  "  became  the  cry  of  privilege,  as  it  had 
been  the  doctrine  of  liberty.  Conceived  as  a  phil- 
osophy of  equality,  it  became  a  philosophy  of  in- 
equality. Economic  freedom  gave  birth  to  the  phil- 
osophy that  the  Government  should  interfere  as 
little  as  possible  with  industry,  and  privilege  later 
capitalized  this  philosophy  as  a  sanction  of  its 
power. 

During  the  generation  that  followed  the  Civil 
War,  competition  tended  to  disappear.  The  basic 
industries  and  many  of  the  secondary  industries 
passed  under  monopoly  control.  Competition  is 
limited  to  retail  business,  to  agriculture  and  to  the 
rather  unimportant  activities  of  the  people.  The 
chain  stores  are  rapidly  occupying  this  field. 
Monopoly  has  become  the  prevailing  economic  sys- 
tem. 

Reflecting  this  change,  the  press  and  the  uni- 
versities ceased  to  exalt  competition,  to  emphasize 
liberty  and  equality  of  opportunity.     There  is  no 

[74] 


voice  now  raised  for  free  trade.  We  no  longer  be- 
lieve in  the  traditions  that  prevailed  for  eight  genera- 
tions. Rather  we  approve  of  a  feudal  society  in 
which  the  control  of  capital  is  lodged  in  a  small 
group  on  one  side,  while  labor  and  the  farmer  are 
massed  as  a  class  apart  on  the  other  side. 

ASCENDANCY    OF    PRIVILEGE 

Privilege  reached  the  height  of  its  power  at  the 
end  of  the  European  war.  The  press  and  agencies 
of  public  opinion  organized  for  war  propaganda, 
became  an  agency  for  the  support  of  the  status  quo. 
Privilege  used  these  agencies  to  arouse  fear  and 
hysteria  against  labor,  the  alien  and  all  liberal  opin- 
ion. It  influenced  the  minds  of  Congress  and  ad- 
ministrative officials.  It  made  possible  the  consider- 
ation of  the  Sedition  Bill  that  was  slipped  through 
the  Senate  with  scarcely  a  protest  and  came  close 
to  passage  in  the  House  of  Representatives. 

FEUDALISM 

The  thought  of  America  has  passed  into  a  third 
stage.  Public  opinion  reflects  the  will  of  a  feudal 
society  just  as  twenty  years  ago  it  reflected  the  will 
of  monopoly;  just  as  up  to  i860  it  reflected  the  will 
of  a  free  competitive  state.  Our  morals  and  our 
customs  are  shaped  by  the  economic  state.  Prohi- 
bition is  a  by-product  of  the  demand  for  efficiency 
from  the  workers.  The  saloon  impaired  the  work- 
ing capacity  of  men.     So   the   saloon   had   to   go. 

[75] 


Education,  and  literature,  are  consciously  shaped  by 
the  ruling  class,  through  the  press,  the  magazine 
and  education.  For  fifty  years  our  immigration 
policy  was  designed  to  supply  cheap  labor  for  the 
mines,  the  mills  and  the  factories.  There  was  no 
concern  for  America,  no  concern  over  the  effect  upon 
our  institutions,  of  unassimilated,  un-Americanized 
aliens.  The  employing  groups  did  everything  to 
make  assimilation  impossible.  They  employed  men 
in  herds.  They  housed  them  in  shacks.  They  em- 
ployed priests  and  agents  to  prevent  their  amalgama- 
tion with  other  races  in  trade  union  organizations. 
They  limited  educational  facilities.  Everything 
possible  was  done  to  submerge  the  immigrant  and 
prevent  his  becoming  articulate  or  even  ambitious  for 
the  American  standard.  In  the  southwest,  Mexi- 
cans are  imported  to  cultivate  the  plantations  and  to 
operate  the  copper  mines.  Persons  of  American 
descent  are  being  driven  out.  They  cannot  compete 
with  the  Mexican  worker.  They  will  not  accept  the 
Mexican  standard.  The  plea  for  the  loosening  of 
our  immigration  laws  against  the  Chinese  is  inspired 
by  the  same  motive. 

The  recent  change  in  our  attitude  toward  the  im- 
migrant is  inspired  by  fear.  The  alien  agitator, 
who  under  the  inspiration  of  the  war  believed  bet- 
ter conditions  to  be  possible,  is  arrested  and  sent 
back  to  Europe  so  that  he  will  not  contaminate  his 
fellow  workers.  Force  is  substituted  for  real  Amer- 
icanization.    The  Department  of  Justice,  the  state 

[76] 


constabulary,  the  army  and  the  police  have  been 
enlisted,  not  to  make  better  citizens  out  of  the  alien, 
but  to  make  him  accept  without  protest  the  rule  of 
the  exploiting  group. 

BACK   TO    THE    OLD    ORDER 

Following  the  war,  a  nation-wide  propaganda  was 
started  whose  objective  was,  "  back  to  conditions  as 
they  were  before  the  war."  It  was  directed  by  the 
press,  by  the  popular  magazines,  by  the  movies,  by 
an  army  of  speakers  who  like  minute  men  molded 
public  opinion  across  the  country.  There  must  be 
no  change.  The  human  mind  was  ordered  to  stand 
still.  The  promises  made  during  the  war  were  to 
be  ignored.  The  right  of  labor  to  organize  was 
challenged.  The  right  to  collective  bargaining  was 
no  longer  admitted.  Congress  assumed  that  this 
made-to-order  public  opinion  was  a  popular  ex- 
pression, and  Congress  started  in  to  reduce  labor  to 
the  status  from  which  it  has  taken  it  a  generation  to 
emerge.  The  injunction  against  the  coal  miners,  the 
attempt  to  make  strikes  illegal,  the  efforts  to  find 
means  for  denying  the  strike  weapon  without  seem- 
ing to  take  it  away,  are  indicative  of  the  psychology 
that  has  been  sedulously  created  for  the  reduction 
of  labor  to  its  pre-war  status. 

THE    ECONOMIC    BASIS   OF    PUBLIC    OPINION 

From  the  beginning  of  America,  our  prevailing 
philosophy  has  reflected  the  economic  structure  of 

[77] 


America.  It  has  reflected  equal  opportunity  and 
economic  liberty;  It  reflected  negro  slavery;  it  re- 
flected and  approved  of  monopoly  and  now  approves 
of  a  caste  like  feudal  society. 

In  a  quarter  of  a  century,  the  mind  of  America 
has  passed  from  a  belief  in  freedom  to  a  belief  in 
feudalism.  Our  political  philosophy  has  passed 
through  the  same  evolution.  From  a  distrust  of 
government,  we  now  accept  the  Prussian  idea  of  the 
state.  From  a  belief  in  economic  equality,  we  ac- 
cept the  wage  relationship  as  final.  From  liberty  of 
thought,  of  the  press  and  of  assembly,  we  have  come 
to  approve  of  a  political  censorship  on  freedom. 
From  an  acceptance  of  change  as  a  most  desirable 
thing,  we  have  come  to  condemn  change.  Privi- 
lege has  decreed  we  shall  have  a  stratified  society. 
It  has  decreed  there  shall  be  no  protest.  The  pres- 
ent order  must  be  protected  at  all  hazards. 

The  thought  of  America  is  shaped  to-day  as  it 
was  a  hundred  years  ago  by  the  economic  structure 
that  prevails.  It  Is  a  mirror  of  the  economic  state. 
Our  psychology,  our  opinions,  even  our  morals  are 
molded  by  the  class  which  owns,  and  particularly  by 
the  class  which  uses  the  Government  for  its  own 
economic  advantage. 


[78] 


CHAPTER  IX 

CULTURE 

The  human  mind  withers  under  censorship.  It 
withers  under  control.  Like  the  body  it  requires 
free  air.  This  is  true  of  all  fields  of  thought, 
whether  it  be  in  art,  in  literature,  or  in  the  technical 
professions.  A  censored  society  cannot  be  original. 
If  censored  by  an  economic  class  it  is  standardized 
to  a  materialistic  level.  It  adjusts  itself  to  the  wants 
of  the  ruling  class. 

A  free  society  invites  originality.  It  stimulates 
variety.  The  mind  goes  out  to  untrodden  fields;  it 
experiments  with  new  ideas.  It  is  moved  by  hope. 
A  privileged  society  is  moved  by  what  the  psycho- 
analysts term  a  "  fear  complex."  It  fears  for  its 
institutions,  for  established  politics,  for  established 
property  rights.  It  fears  most  of  all  for  its  priv- 
ileges; privileges  acquired  and  maintained  by  the 
political  state  and  the  law-making  agencies  of  the 
state.  It  is  the  artificiality,  and  law-made  character 
of  privileged  property  that  makes  it  timorous  of  in- 
tellectual freedom.  The  nation-wide  suppression  of 
protest  since  the  war  is  born  of  fear,  a  fear  which 

[79] 


springs  from  a  realization  of  the  Instability  of  law- 
made  accumulations  and  war-made  profits. 

Privileged  wealth  as  opposed  to  labor-created 
wealth  has  come  to  control  the  cultural  agencies  of 
our  life.  It  controls  the  press.  The  papers  of  the 
large  cities  are  owned  by  men  of  wealth.  In  the 
smaller  towns  the  press  is  under  the  fear  of  the  de- 
partment store,  which  in  turn  is  in  fear  of  the  banks. 
The  country  press  is  controlled  partly  by  advertising, 
partly  by  political  printing,  partly  by  outright  pur- 
chase of  Its  opinions.  The  press  has  ceased  to  be  a 
record  of  current  events,  honestly  reported.  It  re- 
flects the  will  of  a  class.  And  It  uses  Its  power  as 
though  It  were  a  private  business,  irrespective  of  the 
trust  involved  in  the  presentation  of  the  news. 

PRESS    CONTROL 

Privilege  controls  the  organized  news  agencies 
which  collect  and  distribute  the  news.  The  Associ- 
ated Press  is  a  close  corporation  Into  which  new 
papers  may  not  enter.  Telegraphic  dispatches  pass 
through  the  censorship  of  the  local  office  that  gathers 
them,  and  then  through  the  central  office  in  New 
York  or  Chicago  which  distributes  them.  Foreign 
news  passes  through  the  same  editing  process.  It 
is  censored  In  London.  Not  only  Is  news  of  a  lib- 
eral sort  excluded  from  the  press;  it  is  distorted  and 
colored  in  its  presentation,  as  well  as  in  its  final  edit- 
ing- 
Privilege     controls     advertising.     The     counting 

[80] 


room  controls  the  editorial  policy.  This  control  is 
direct,  through  the  actual  ownership  by  privileged 
groups  of  the  corporations  which  place  advertising; 
it  is  indirect,  through  the  power  of  the  advertising 
agencies  to  shape  the  policy  of  papers  and  magazines 
to  which  it  gives  contracts.  Some  of  this  control  is 
frank,  but  much  of  it  is  subtle  and  indirect.  As  but 
few  publications  can  live  without  advertising,  the 
press  of  the  country  is  under  the  control  of  the  count- 
ing room.  The  editorial  room  and  the  control  of 
public  opinion  has  been  sabotaged;  it  is  sabotaged 
by  capitalism,  by  privilege,  by  those  who  own. 

Many  of  the  popular  magazines  have  passed  under 
capitalistic  ownership.  Some  of  them  are  directly 
owned  by  banks  and  large  corporate  interests;  others 
are  controlled  as  is  the  press  through  advertising. 

HIGHER    EDUCATION 

Our  colleges  and  universities  reflect  the  same  eco- 
nomic will.  Their  cultural  ideals  are  subordinated 
to  financial  considerations.  Buildings,  endowments, 
equipment,  have  become  more  important  than  intel- 
lectual eminence.  Any  one  familiar  with  academic 
thought  must  admit  the  progressive  decay  of  our 
educational  institutions  during  the  last  twenty-five 
years.  The  donor  of  funds  has  come  to  shape  our 
cultural  life.  The  Carnegie  Endowment  for  teach- 
ers' pensions  is  a  standing  menace  to  intellectual  in- 
tegrity. 

University  trustees  are  chosen  from  the  money- 
[8i] 


giving  groups.  They  are  largely  bankers  and  finan- 
ciers. Nowhere  is  the  teaching  staff  given  any  sub- 
stantial control  over  the  university  personnel  or  the 
course  of  study.  This  control  is  in  the  hands  of 
the  trustees.  They  scan  the  records  of  teachers; 
they  drop  men  of  doubtful  opinions.  Advancement 
is  denied  to  men  who  are  not  safe.  There  are  only 
a  few  progressive  thinkers  on  political  economy  left 
in  our  colleges  or  universities.  The  social  sciences 
confine  themselves  to  safe  subjects;  subjects  years  in 
arrears  of  current  day  problems.  There  is  little  at- 
tempt to  honestly  interpret  industrial  conditions,  or 
to  understand  the  cause  of  Industrial  unrest. 

Men  who  remain  in  the  teaching  profession  are 
compelled  to  accept  this  subordination  to  outside 
control.  They  accept  the  censorship  of  thought,  and 
act  accordingly.  This  is  true  not  alone  of  the  eco- 
nomic and  political  sciences;  It  Is  true  of  literature, 
of  science,  of  philosophy.     It  cannot  be  otherwise. 

Our  universities  are  becoming  sterile.  They 
awaken  little  interest  on  the  part  of  students,  and 
contribute  little  to  the  intellectual  life  of  the  country. 
Such  thought  as  Issues  on  social  questions  is  cold- 
storage,  statistical,  uninspiring.  Our  universities 
are  sabotaged  by  an  economic  class;  by  the  same  class 
that  controls  the  press  of  the  country. 

Fear  has  enveloped  practically  all  of  our  educa- 
tional agencies;  it  is  suppressing  the  intellectual  pro- 
cesses of  modern  life.  It  has  been  decreed  that  there 
shall  be  no  change.     The  human  Intellect  has  been 

[82] 


ordered  to  stand  still.     In  the  realm  of  academic 
thought  it  is  standing  still. 

THE    PUBLIC   SCHOOL 

The  same  censorship  extends  to  elementary  and 
secondary  schools.  Teachers  have  been  suspended 
because  of  a  suspicion  of  sympathy  for  Russia. 
Discussions  of  revolutionary  Europe  are  under  a  ban. 
The  slightest  reference  to  radical  thought,  even  the 
answering  of  an  innocent  question  from  a  pupil,  has 
been  the  cause  of  an  inquisitorial  investigation  in 
New  York,  Washington,  and  elsewhere.  The  press 
has  ruthlessly  destroyed  the  reputation  of  men  and 
women  teachers  by  the  display  of  headlines  and  scare 
stories.  As  a  result,  the  teaching  profession  is  in 
terror.  It  is  under  surveillance.  Under  such  con- 
ditions men  are  of  little  value  as  teachers.  They 
are  of  little  value  to  the  students.  Many  leave  the 
profession  in  consequence. 

Privilege  is  striking  at  education  in  yet  another 
way.  The  increasing  cost  of  living  is  stripping  uni- 
versities, colleges  and  public  schools  of  teachers.  In 
a  recent  address.  Dean  James  E.  Russell  of  the 
Teachers  College  of  Columbia  University,  New 
York,  is  reported  as  saying  that  there  are  more  than 
130,000  vacancies  in  the  schoolrooms  of  the  country, 
and  that  300,000  teachers  are  paid  less  than  $450 
a  year.  He  said  the  waiters  in  the  dining  rooms 
get  more  for  their  services  than  do  graduates  of  the 
school  when  they  enter  the  teaching  field.     William 

[83] 


C.  Redfield,  former  Secretary  of  Commerce,  stated 
at  the  same  meeting  that  the  schools  of  the  rural 
districts  of  America  "are  rapidly  disintegrating"; 
while  Jacob  Gould  Schurman,  President  of  Cornell 
University,  said  the  remuneration  paid  educators  is 
so  low  that  any  red-blooded  man  hesitates  to  place 
such  a  financial  burden  upon  his  wife  and  family. 
The  present  low  salary  scale  Is  threatening  the  very 
existence  of  education. 

Privilege  fears  the  public  schools.  It  fears  edu- 
cation. Education  breeds  unrest.  It  lures  the 
children  of  workers  out  of  the  factory.  It  stimulates 
a  demand  for  a  higher  standard  of  living.  Most 
important  of  all,  it  educates  the  worker  and  strength- 
ens his  intellectual  power. 

Privilege  is  unwilling  to  pay  for  education.  It  is 
unwilling  to  pay  Increased  taxes  which  adequate  pay 
to  teachers  and  professors  involves.  While  America 
is  willing  to  spend  $1,500,000,000  on  a  military 
establishment  in  peace  times.  It  expended  In  19 13  less 
than  $700,000,000  In  all  educational  fields.  Amer- 
ica spends  less  than  one-third  as  much  for  education 
as  It  does  for  advertising  and  advertising  solicitors. 
Our  total  educational  budget  in  19 13  for  the  entire 
nation  was  less  than  one  half  the  amount  called  for 
by  the  war  and  navy  estimates  for  the  year  192 1. 

INDUSTRIAL    SUPPRESSION 

Privilege  exercises  the  same  deadening  effect  on 
industrial  processes.     For  two  hundred  years  com- 

[84] 


petition  encouraged  initiative.  With  the  coming  of 
monopoly,  however,  invention  was  chilled.  The 
present  economic  structure  Is  financial  rather  than  in- 
dustrial. Industry  is  operated  to  maintain  security 
issues.  It  is  operated  by  bankers  and  financiers. 
The  producing  classes  are  being  driven  out  of  con- 
trol. Anything  that  might  imperil  the  existing  in- 
dustrial organization  would  endanger  the  speculative 
security  structure.  As  a  result,  the  financial  group 
suppresses  Inventions.  A  revolutionary  change  in 
engineering  would  endanger  $20,000,000,000  of 
railway  values.  Electrification  of  the  railroads 
would  scrap  hundreds  of  millions  Invested  In  car 
equipment.  It  would  deprive  the  mine  operators  of 
a  market  for  $450,000,000  of  coal.  It  would  im- 
peril the  business  of  railway  supply  corporations  that 
are  interlaced  by  stock  ownership  with  the  owners 
and  directors  of  the  railroads.  A  new  electrical 
discovery  would  menace  the  electrical  trust.  It,  too. 
Is  Interlaced  with  the  railroads  and  the  banking  trust. 
The  same  is  true  in  many  other  industries. 

The  security  Issues  of  the  steel  trust  are  depen- 
dent upon  the  maintenance  of  the  status  quo.  A 
great  discovery  might  bring  In  competition.  It 
might  decentralize  the  Industry  into  smaller  units. 
A  generation  ago,  when  competition  ruled  In  the 
iron  and  steel  industry,  the  steel  magnates  changed 
their  machines  every  few  years.  They  did  this  at 
great  cost  to  meet  the  competition  of  other  mills. 
This  Is  no  longer  necessary.     For  the  steel  mills 

[85] 


are  interlaced  through  common  financial  ownership 
into  what  is  in  effect  a  single  trust. 

The  art  of  telegraphy  has  made  but  little  progress 
in  fifty  years'  time.  There  are  scores  of  inventions 
which  would  greatly  increase  the  rapidity  of  trans- 
mission and  permit  a  considerable  reduction  in  tele- 
graph rates.  The  same  is  true  in  telephony.  It 
is  true  in  scores  of  processes  that  are  not  subject  to 
competition.  Any  advance  in  the  arts  might  imperil 
monopoly  and  unsettle  the  financial  structure,  which 
is  primarily  interested  in  the  maintenance  of  the 
status  quo. 

DISCOURAGING    INITIATIVE 

Privilege  discourages  initiative  on  the  part  of  the 
worker.  This  is  inevitable  as  class  divisions  be- 
come fixed.  Labor  contributed  generously  of  its 
mind  so  long  as  labor  was  impelled  by  ambition. 
But  with  the  stratification  of  society,  labor  solidarity 
has  come  in.  The  slackening  in  production  com- 
plained of  is  a  natural  result  of  a  recognition  by 
labor  of  its  new  status.  It  is  a  natural  reaction 
against  the  present  industrial  system.  A  new  psy- 
chology has  come  in.  It  is  partly  conscious,  partly 
a  subconscious  realization  that  labor  as  a  class  can- 
not rise  above  its  station.  It  is  doomed  to  remain 
a  wage-earning  class.  Labor  sabotage  referred  to 
In  an  earlier  chapter  Is  one  manifestation  of  class 
solidarity.     It  is  the  worker's  reply  to  the  injunc- 

[86] 


tion,  to  anti-strike  legislation,  to  the  attitude  of  the 
employing  classes  generally. 

SUPPRESSION   OF    DISCUSSION 

Privilege  is  also  suppressing  discussion  in  the  press 
and  on  the  platforms.  The  Espionage  and  Sedition 
Acts  were  directed  against  industrial  unrest  quite 
as  much  as  against  the  fear  of  revolution.  So  were 
the  activities  of  the  Department  of  Justice  against 
the  immigrant  alien.  Freedom  of  speech  was  not 
only  suppressed,  but  meetings  were  covered  by  secret 
service  men  much  as  they  were  in  Russia  prior  to  the 
revolution.  Peaceful  meetings  have  been  broken  up 
by  private  individuals  having  the  support  or  sym- 
pathy of  the  Government.  The  Government  main- 
tains an  army  of  secret  service  men,  while  quasi- 
governmental  agencies  and  private  detective  agencies 
organized  during  the  war  have  continued  to  spy  upon 
liberal  and  radical  thought.  The  Socialist  press  is 
still  denied  the  mails. 

Fear  is  the  explanation  of  this  form  of  sabotage. 
It  is  fear  for  privileges  created  by  power  and  main- 
tained by  law. 

The  Lusk  Committee  of  New  York  violated  the 
Federal  Constitution.  It  broke  into  offices,  seized 
private  papers,  and  arrested  persons  without  proper 
warrants.  Aliens  have  been  arrested  by  the  thou- 
sands for  alleged  offenses,  which  when  subjected  to 
inquiry  were  found  to  be  too  trivial  for  consideration, 

[87] 


Hundreds  of  persons  have  been  deported  for  opin- 
ions and  acts  that  passed  unnoticed  for  forty  years. 
Many  of  these  had  no  opportunity  for  even  a  sha- 
dow of  a  trial,  none  were  given  a  jury  trial,  and  many 
were  denied  the  right  of  going  into  court  on  a  writ 
of  habeas  corpus  to  try  out  the  question  of  whether 
there  was  any  evidence  against  them  at  all. 

Constructive  sedition,  the  making  of  mere  opinions 
a  criminal  offense,  was  urged  on  Congress  by  the 
Department  of  Justice.  The  mind  of  America  is 
being  threatened  by  inquisition  as  it  was  in  the  six- 
teenth century  by  Spain,  as  it  was  by  medieval  Europe 
for  religious  heresies,  as  it  was  in  old  Russia  under 
the  Czar. 

The  sedition  laws  which  have  been  proposed  and 
seriously  urged  in  Congress  would  have  weakened 
the  rights  of  labor  to  organize.  These  laws  would 
have  placed  in  the  hands  of  policemen,  marshals, 
prosecuting  attorneys  and  judges  an  autocratic 
power  by  which  men  might  be  dragnetted  into  court, 
and  if  they  escaped  conviction  they  would  be  bank- 
rupt in  purse  and  possibly  held  in  jail  for  an  indefinite 
time  at  the  will  of  the  exploiting  group. 

Force  is  being  substituted  for  discussion.  Society 
is  being  made  to  conform  to  conventional  ideas  by 
a  censorship  that  controls  our  cultural  life.  Inde- 
pendent thought  is  being  driven  into  the  cellar.  The 
mailed  fist  hangs  over  our  thought  processes.  Privi- 
lege is  using  the  same  tools,  it  is  adopting  the  same 
methods,  it  is  aiming  at  the  same  objectives  as  did 

[88] 


the  old  regime  In  France,  as  did  the  feudal  caste  in 
Prussia  and  Russia. 

RISE   OF    MEDIOCRITY 

As  a  consequence  the  intelligence  of  America  is 
being  driven  out  of  influence  and  power.  It  is  not 
found  in  politics.  It  is  not  found  in  the  pulpit.  It 
is  not  found  in  the  colleges  or  the  schools.  It  is  not 
found  in  the  railroads,  in  banking,  in  trustified  in- 
dustry. American  life  and  American  industry  is 
passing  into  mediocre  hands.  It  is  being  feudalized 
under  the  control  of  an  economic  caste  that  has  little 
cultural  enthusiasm  itself,  that  has  little  intelligence 
or  interest  outside  of  the  making  of  money.  It 
demands  that  all  other  minds  shall  be  content  with 
its  materialistic  point  of  view.  This  is  the  result  of 
the  industrial  change  which  has  placed  the  control 
of  our  economic  life  in  the  hands  of  the  exploiting, 
banking  groups  which  are  not  interested  primarily 
In  productive  processes.  Our  economic  life  has 
been  transformed  in  a  generation's  time.  It  has  be- 
come a  financial  rather  than  an  industrial  system. 

Members  of  the  engineering  profession  are  mani- 
festing unrest  over  the  waste  and  Inefficiency  of 
capitalistic  processes  and  the  restrictive  profit-making 
policies  which  prevail.  Mr.  Walter  N.  Polakov, 
consulting  engineer,  has  contributed  a  number  of 
articles  on  this  subject,  one  in  the  New  York  World 
and  another  In  the  Socialist  Reviezv  for  March,  1920. 
In  the  latter  article  he  stated  that  40  per  cent,  of  the 

[89] 


blast  furnaces  of  the  country  were  idle  in  the  last 
decade.  The  avoidable  waste  alone  was  equivalent 
to  a  general  strike  of  all  the  workers  of  the  whole 
iron  and  steel  industry  for  three  months  of  every 
year.  The  steel  trust,  he  says,  claims  losses  during 
the  recent  strike  of  $23,750,000.  The  idleness  of 
capital  in  just  one  department  of  the  iron  and  steel 
industry  is  over  twice  as  much  each  year  as  the  loss 
incurred  in  this  strike.  Stated  in  another  way,  he 
says,  the  same  amount  of  products  as  are  now  pro- 
duced could  be  turned  out  by  the  mills  in  a  six  hours' 
day  instead  of  ten  if  the  mills  were  intelligently 
operated. 

In  19 1 8,  54  per  cent,  more  ore  went  into  the 
manufacture  of  an  equal  amount  of  pig  iron  than 
was  used  in  19 15.  Fifty-four  per  cent,  more  ore 
has  to  be  carried  by  the  railroads  to  produce  the  same 
amount  of  pig  iron,  than  was  carried  three  years 
earlier.  Duplicating  processes  are  wasteful  of 
metal.  They  wasted  155,000  tons  of  steel  in  1918, 
465,000  car  miles  of  freight,  and  100,000  tons  of 
fuel. 

The  by-product  wastage  is  equally  colossal. 
This  is  true  of  coke,  of  ammonium  sulphate,  of  ben- 
zol, of  tar.  The  total  loss  in  unrecovered  by- 
products that  was  avoidable  in  19 18,  amounted  ac- 
cording to  his  estimates,  to  $267,400,000. 

The  wastage  in  human  life  traceable  to  unintelli- 
gent industry  involved  four  times  as  many  accidents, 

[90] 


fatalities,  or  permanent  disabilities  in  191 8  as  in 
19 1 5.  In  mining  and  the  transportation  of  fuel  and 
ore,  he  says,  ioo,OQO  men  are  rendering  no  useful 
service  to  society. 

This  is  traceable  to  the  control  of  our  economic 
life  by  economic  groups  which  are  shielded  from 
competition  by  law.  They  can  afford  to  waste,  first 
because  the  waste  is  shifted  onto  the  public,  and  sec- 
ond because  in  many  industries  profits  are  actually 
increased  by  wasteful  and  inefficient  methods. 


[91] 


CHAPTER  X 

EXPLOITERS 

We  think  of  America  as  a  nation  of  producers.  And 
such  we  were  up  to  a  few  years  ago.  Our  fathers 
worked  on  the  farm  or  In  the  shop.  The  factory 
unit  was  small.  The  corporation  was  merely  an  en- 
larged partnership.  It  had  not  become  the  huge 
impersonal  thing  it  is  to-day.  A  farmer  was  a 
farmer  —  not  a  landlord.  There  were  few  tenants 
or  agricultural  workers.  Any  one  could  own  his 
own  farm  If  he  chose.  The  wage  earner  worked 
alongside  of  the  employer.  He  had  not  yet  become 
a  number,  carrying  a  brass  check  as  a  means  of 
identification.  He  too  expected  to  rise  and  himself 
become  an  employer. 

Industrial  processes  were  on  a  small  scale.  Capi- 
talism had  not  yet  divided  the  master  from  the  man. 
There  were  few  non-producers  in  this  simple  eco- 
nomic organization.  Price  was  fixed  by  labor  cost. 
Profits  were  kept  at  a  minimum  by  competition. 
Banking  was  a  local  business,  often  carried  on  by  a 
single  individual  as  a  convenience  to  the  neighbor- 
hood.    Even  railroading  was  on  a  competitive  basis. 

[92] 


The  railroads  were  operated  for  the  benefit  of  the 
communities  and  states  which  organized  them. 

Our  early  society  was  a  producers'  society,  in 
which  productive  labor  was  the  all  but  universal 
rule.  Men  received  all  that  their  labor  produced. 
There  was  little  or  no  overhead  in  the  form  of  taxes, 
interest  or  rent. 

Up  to  1880  there  was  little  surplus  wealth.  Ex- 
ploitation was  almost  non-existent.  As  late  as  forty 
years  ago  America  was  a  nation  of  economic  equality. 
There  were  but  few  intermediaries,  and  wealth  ex- 
changed from  man  to  man  on  a  competitive  basis 
that  kept  prices  to  production  cost. 

Our  economic  processes  were  efficient.  They 
were  in  the  hands  of  men  familiar  with  industry. 
They  had  come  up  from  the  bottom.  Men  met 
fairly  in  open  competition.  We  had  a  producers' 
society  in  which  men  worked  to  capacity.  They 
produced  willingly.  They  were  impelled  by  one 
thought;  to  produce  in  quantity  and  to  serve  and 
hold  the  market  by  excellence  of  product  and  cheap- 
ness of  price. 

RISE    OF    THE    EXPLOITING    CLASS 

A  new  class  began  to  emerge  about  1890.  It 
sprang  from  the  tariff,  the  railroads  and  the  ground 
landlords.  More  recently  the  banking  group  has 
become  ascendant.  This  class  exploits  the  wealth 
produced  by  others.  Year  by  year  it  takes  an 
increasing  share  of  the  annual  output.     It  takes  it 

[93] 


in  rent,  In  interest  and  in  profits.  Within  the  last 
ten  years,  and  especially  as  a  result  of  the  war, 
this  class  has  been  increasing  in  numbers  and  In 
power.  It  has  become  the  dominant  class  in  the 
nation.  No  one  wants  to  be  a  producer  If  he  can 
avoid  It.  To  be  a  manual  worker  is  a  badge 
of  a  lower  caste.  To  be  a  farmer  is  no  longer 
a  mark  of  respectability.  The  producer  has  been 
displaced  In  public  esteem  by  the  exploiting  type. 
Every  one  aims  to  crowd  into  the  exploiting  busi- 
nesses and  professions.  It  Is  here  that  great 
wealth  is  to  be  made.  It  Is  to  these  groups  that 
social  distinction  attaches.  The  native-born  Amer- 
ican is  ceasing  to  be  an  artisan;  more  rarely  Is  he  an 
unskilled  worker.  He  seeks  to  avoid  productive  in- 
dustry. He  sends  his  children  to  college  so  that  they 
may  rise  in  the  social  scale,  and  to  rise  means  to  get 
out  of  the  producing  groups.  Manual  labor  is 
largely  performed  by  the  foreign-born.  They  sup- 
port both  themselves  and  the  Anglo-Saxon  stock. 
They  perform  the  hard  unskilled  labor.  There  Is 
now  a  racial  as  well  as  an  economic  class  division. 

THE    BURDEN    ON    THE    PRODUCING    CLASSES 

Productive  labor  now  supports  Itself  and  a  vast 
army  of  non-productive  exploiters  that  have  wedged 
themselves  Into  every  business  and  imposed  them- 
selves on  every  transaction.  They  perform  count- 
less useless  functions.  They  levy  an  Increasing  tri- 
bute  and  take   an  increasing  share  of  the   output. 

[94] 


They  do  this  through  profits,  rents,  commissions  and 
charges  for  unnecessary  service.  They  employ  an 
army  of  dependants  that  profit  from  the  expendi- 
ture, the  ostentation  and  the  luxuries  of  the  exploit- 
ing group.  In  a  generation's  time  we  have  changed 
from  a  producing  society  into  a  society  in  which  pos- 
sibly one-third  to  one-half  of  the  wealth  produced  is 
appropriated  by  the  parasitical  classes.^ 

The  exploiting  groups  include  the  magnates  of 
finance.  There  are  bankers,  brokers,  middlemen, 
commission  men,  speculators.  There  is  a  growing 
class  that  lives  ofif  rents,  especially  ground  rents  of 
the  cities.  There  is  a  profit-taking  class,  a  royalty- 
taking  class.  There  is  a  class  that  finances  and  con- 
trols the  monopolized  industries.  Below  is  an 
army  of  butlers,  footmen,  maids,  chauffeurs,  who 
draw  wages  and  salaries  from  the  exploiting  group. 
Lawyers  are  largely  dependants  of  this  class,  as  are 
the  men  who  pose  as  captains  of  Industry,  but  who 
merely  control  credit  and  through  this  control  rise 
to  wealth  and  power.  The  ground  landlord  takes 
the  greatest  share.  His  wealth  grows  by  night  and 
by  day.  He  does  nothing  to  produce  It.  He  grows 
In  power  with  every  advance  in  society  and  with 
every  increase  of  population. 

These  are  the  more  powerful  exploiting  groups. 
It  Is  these  who  take  an  increasing  share  of  the  wealth 
produced. 

1  See  Chapter  XIII. 

[95] 


LABOR   AND   EXPLOITATION 

The  rents,  profits,  commissions,  salaries  and 
wages  of  the  exploiting  groups  are  paid  by  the 
worker  and  the  farmer,  who  a  generation  ago  were 
free  from  such  burdens.  They  knew  no  overhead. 
They  received  all  that  their  labor  produced.  The 
only  fund  from  which  overhead  can  be  taken  is  the 
wealth  produced  each  year  by  labor,  either  labor  in 
the  mill,  or  labor  on  the  land.  The  private  palaces 
of  our  cities,  the  splendid  hotels,  the  country  estates, 
the  thousands  of  shops  maintained  for  the  parasitical 
classes,  are  all  maintained  by  the  producing  groups. 
They  are  ultimately  supported  by  the  toil  of  those 
who  work  on  the  farm,  in  the  mill,  or  in  the  fac- 
tory. 

Herein  is  the  ultimate  division  of  all  society.  The 
groups  and  classes  are  not  always  clearly  marked, 
nor  is  the  line  between  the  labor  which  is  produc- 
tive and  that  which  is  exploitive.  But  the  division 
is  none  the  less  clear.  It  is  between  the  producers 
and  the  exploiters.  And  in  the  final  analysis,  pro- 
ductive labor  supports  both  itself  and  the  class  that 
lives  off  its  efforts. 

Here,  too,  is  the  line  of  natural  political  division. 
It  should  be  between  those  who  produce  wealth  and 
those  who  exploit  it.  The  governments  of  the 
world  almost  everywhere  represent  the  exploiting 
groups.  But  labor  and  the  farmer  are  breaking 
into  politics  in  a  number  of  countries.     There  is  only 

[96] 


one  vital,  defensible  party  division,  and  that  is  a 
division  which  frankly  represents  these  two  groups 
which  struggle  over  the  wealth  of  the  world. 

Parasitism  is  another  form  of  sabotage.  It  is 
sabotage  on  society,  especially  on  labor  and  those 
who  toil  to  support  the  world.  Parasitism  is  also 
direct  action,  for  the  exploiting  groups  do  not  arbi- 
trate, they  do  not  reach  an  agreement  with  those 
from  whom  they  take  tribute.  They  act  on  their 
own  judgment.  They  take  what  they  can  get. 
They  charge  what  the  traffic  will  bear.  This  is  the 
essence  of  direct  action,  whether  it  be  by  labor,  by 
capital,  or  by  the  landlord  who  fixes  rent  as  suits  his 
will  or  his  power. 

This  is  another  explanation  of  the  disease  of 
sabotage  which  is  creeping  into  all  labor.  The 
banker  complains  of  taxes  that  discourage  initiative. 
The  same  discouragement  operates  on  the  produc- 
ing classes  when  they  become  conscious  of  the  exist- 
ence of  a  parasitical  class  and  the  tribute  which  it 
takes.  Just  as  the  peasant  in  pre-revolutionary 
France  gradually  ceased  to  produce  because  of  fear 
of  the  tax  collector  and  the  agent  of  the  grand 
seigneurs,  so  to-day  the  worker  slacks  because  of  the 
exactions  of  the  state  and  the  privileged  classes. 
When  a  society  decays  at  the  top,  the  decay  ulti- 
mately penetrates  into  all  other  classes. 


[97] 


CHAPTER  XI 

THE  STATE 

The  state  has  become  an  agency  of  sabotage.  It  dis- 
courages the  production  of  wealth.  It  determines 
its  distribution  as  well.  It  paralyzes  social  and  indi- 
vidual effort.  It  violates  the  laws  of  biology.  This 
has  been  true  in  large  measure  from  the  beginning. 

The  state  is  the  reverse  of  what  we  think  it  is. 
We  think  of  it  as  an  instrument  to  enable  society  to 
express  itself.  In  reality,  it  prevents  such  expres- 
sion. It  is  an  obstacle  to  freedom.  The  state  is 
not  even  an  agency  of  democracy.  It  is  not  a  guar- 
antee of  liberty. 

A  properly  organized  state  should  be  as  friction- 
less  as  possible.  It  should  encourage  the  greatest 
possible  freedom  of  individual  and  social  action.  It 
should  express  the  will  of  the  community  easily  and 
accurately.  It  should  be  responsive  to  its  wants  and 
needs.  It  should  act  almost  automatically.  And 
it  should  not  act  as  a  detached  thing,  but  as  an  in- 
tegral part  of  the  everyday  life  of  the  people.  The 
state   is   the   reverse   of   all   these   things.     It   is   a 

[98] 


brake  to  effort.  It  is  in  conflict  with  man's  cultural, 
social  and  economic  activities.  The  state  is  an 
agency  of  suppression.  It  should  be  an  agency  of 
cooperation  and  help. 

THE    ORIGIN    OF    THE    STATE 

We  see  the  artificial  nature  of  the  state  when  we 
examine  its  beginnings.  It  had  its  origin  in  force. 
For  centuries  it  was  an  instrument  of  oppression. 
It  had  no  other  function.  The  state  came  into  be- 
ing to  resist  attack  from  without  and  to  prevent  pro- 
test from  within.  That  is  all  the  state  was  from  the 
tenth  to  the  middle  of  the  last  century.  It  denied 
expression  to  the  average  man.  And  it  performed 
little,  almost  no  social  service  whatsoever. 

This  was  the  political  genesis  of  the  state.  The 
economic  genesis  is  equally  illuminating.  In  its 
origin  the  modern  state  was  not  a  voluntary  as- 
sociation of  free  individuals.  It  was  a  landlords' 
council.  It  issued  from  the  feudal  system.  It  had 
its  birth  in  land  monopoly.  Even  the  form  of  gov- 
ernment is  landed,  feudal.  The  modern  constitution 
took  its  form  from  the  seigneurs,  from  the  barons 
and  the  Junker  lords  of  Europe.  Parliament  was 
a  group  of  landlords  organized  to  resist  the  king. 

THE    BRITISH    CONSTITUTION 

The  British  Constitution  is  the  political  expres- 
sion of  the  economic  interests  of  the  great  landlords 
who  banded  themselves  together  nearly  eight  cen- 

[99] 


turies  ago  In  their  struggles  with  the  king.  The 
great  barons  organized  a  King's  Council.  They 
quarreled  with  the  king  to  be  rid  of  their  obligations 
to  the  Crown.  The  council  was  a  council  of  re- 
sistance. It  fought  the  king  on  the  one  hand,  and 
the  people  on  the  other.  Ultimately  it  reduced  the 
king  to  impotence  and  the  people  to  serfdom.  This 
King's  Council  later  became  the  House  of  Lords. 
In  time  it  split  into  two  parts;  the  House  of  Com- 
mons being  a  council  of  lesser  landlords.  Neither 
the  House  of  Lords  nor  the  House  of  Commons 
were  interested  in  political  liberty.  They  had  no 
concern  for  the  people.  Neither  the  Magna  Charta, 
the  Petition  of  Rights,  nor  the  Bill  of  Rights  were 
declarations  of  liberty  for  the  common  man.  They 
were  declarations  of  resistance  to  the  state  which 
sought  to  collect  perfectly  legal  dues  from  the 
great  barons.  The  great  landlords  wanted  to  be 
free  from  these  feudal  dues.  They  wanted  to  rule 
their  serfs  unrestrained  by  the  Crown.  And  this 
is  the  genesis  of  the  British  Constitution.  It  was 
born  of  a  struggle  of  economic  groups. 

If  we  study  the  history  of  Great  Britain  from  the 
Magna  Charta  down  to  the  Lloyd  George  budget 
of  1909  and  the  Irish  problem  of  to-day,  we  see  that 
the  question  of  landed  power  and  of  landed  privi- 
lege appears  on  every  page  and  enters  into  every 
great  controversy.  Even  the  expansion  of  the  Brit- 
ish Empire  is  a  product  of  the  exportation  of  the 
rents  and  profits  of  the  landed  aristocracy  to  weaker 

[100] 


countries,  which  later  became   imperialistic  posses- 
sions of  the  Crown. 

Parliamentary  government  had  its  origin  in  an 
economic  oligarchy.  It  took  its  form  from  a  group 
of  landlords.  It  was  an  artificial  instrument  whose 
historical  background  is  feudalism.  The  political  in- 
stitutions of  the  world  to-day  took  their  form  from 
the  council  of  British  landlords  organized  for  private 
profit  and  economic  power. 

ECONOMIC    FOUNDATIONS    OF    THE    STATE 

The  economic  organization  of  the  state,  against 
which  we  protest  in  Russia,  is  common  to  all  or- 
ganized government.  Revolutionary  Russia  has 
merely  democratized  the  economic  state  as  it  has 
prevailed  for  at  least  eight  centuries.  It  has  ex- 
panded the  council  of  great  landlords  into  a  council 
that  includes  the  peasant  and  the  worker.  The  Rus- 
sian Soviet  is  an  adjustment  of  the  political  state  to 
the  industrial  state  as  it  is  to-day.  Just  as  the  House 
of  Lords  was  an  economic  group  legislating  in  the 
interest  of  a  landed  class,  so  the  Russian  Soviet  is 
an  economic  group  legislating  in  the  interest  of  the 
great  majority  of  the  people  who  form  the  producing 
class.  The  British  Parliament  represents  those  who 
take  rents.  The  Russian  Soviet  represents  those 
who  paid  rents. 

We  assume  that  the  state  is  a  detached  thing 
which  issued  from  the  voluntary  association  of  the 
people.     Historically  considered  it  is  an  economic 

[lOl] 


heritage.  This  is  almost  all  the  British  Parliament 
has  ever  been.  The  financiers  and  commercial  classes 
have  made  their  way  into  both  houses.  But  they 
are  subordinate  to  the  landed  gentry.  Parliament 
remains  what  it  was  in  the  sixteenth  century.  It 
is  still  a  board  of  directors  of  the  feudal  classes.  It 
is  a  landlords'  soviet.  For  the  landlords  rule  Great 
Britain  to-day  much  as  they  did  in  the  sixteenth  and 
the  seventeenth  centuries. 

The  rest  of  the  world  has  adopted  the  British 
Parliament  as  a  model.  It  is  wholly  accidental, 
wholly  artificial.  And  the  ruling  classes  have  given 
a  sanctity  to  parliamentary  forms  because  they  are 
able  to  control  them.  They  would  have  overthrown 
them  quickly  enough,  as  they  have  attempted  to  do 
in  Russia,  as  they  have  done  in  Hungary,  if  the 
political  state  had  sought  to  honestly  reflect  the  eco- 
nomic state  by  representing  the  producing  classes. 

THE    AMERICAN   CONSTITUTION 

The  American  Constitution  is  the  lineal  heir  of 
the  landlord's  state,  as  it  was  in  Great  Britain  a 
century  and  a  quarter  ago.  It  was  not  drafted  by 
the  men  who  wrote  the  Declaration  of  Independence, 
but  by  men  who  stepped  into  power  following  the 
Revolution,  and  who  were  apprehensive  of  demo- 
cratic institutions.  They  feared  popular  govern- 
ment and  took  precautions  to  limit  the  expression  of 
the  popular  will.  The  Revolutionary  War  was 
followed  by   a   period   of   reaction.     The  business 

[102] 


classes  of  the  North  and  the  landlords  of  the  South 
saw  the  value  of  a  centralized  government,  distant 
from  the  people.  They  needed  it  to  control  taxa- 
tion, to  secure  a  protective  tariff,  to  validate  the 
issues  of  Continental  currency  in  which  they  had 
speculated.  The  Revolution  was  won  by  the 
workers  and  the  farmers,  the  Constitution  was 
drafted  by  the  land-owning  aristocracy  of  the  South 
and  the  commercial  classes  of  the  North.  Alexander 
Hamilton  took  the  more  conservative  elements  of  the 
British  Constitution  and  shaped  them  to  the  interests 
of  an  economic  class  which  willingly  approved  of 
the  confusion,  the  centralization,  and  the  many  limi- 
tations that  were  designed  to  hold  democracy  in 
check.  There  was  industrial  unrest  then  as  now. 
And  fear  of  democracy  was  one  of  the  influences  in 
making  the  Constitution  the  complicated,  difficult, 
unworkable  instrument  that  it  is. 

It  is  the  centralization  of  government  and  its 
complicated,  unresponsive  form  that  makes  it  an 
agency  of  the  exploiting  classes. 

WHAT  A    NATURAL    STATE    SHOULD    BE 

If  we  inquire  as  to  what  a  democratic  state  should 
be  we  see  how  unnatural  the  political  state  is.  It 
is  separate  and  detached  from  all  other  processes. 
It  does  not  function  freely  and  easily.  It  is  diffi- 
cult to  understand.  It  is  out  of  harmony  with  what 
we  know  about  the  natural  processes  of  life. 

First,  a  natural  state  should  be  simple.  It  should 
[103] 


be  easily  understood  and  easily  worked.  It  should 
function  with  such  directness  that  the  voter  can 
readily  achieve  his  desires  by  a  single  expression  of 
his  will.  The  line  of  action  between  the  voter  and 
legislation  should  be  as  short  and  direct  as  possible. 
The  representative  should  be  responsible  and  re- 
sponsive to  the  people.  It  should  be  easy  to  hold 
him  accountable. 

Second,  a  natural  government  should  be  close  to 
the  people.  A  highly  centralized,  distant  govern- 
ment is  easily  controlled  by  privileged,  exploiting 
groups.  Local  government  is  more  likely  to  be  hon- 
est and  efficient  than  a  government  that  is  distant 
from  the  people.  That  is  one  reason  for  treating 
the  local  unit  rather  than  a  highly  centralized  state 
as  the  basis  for  government.  This  was  Jefferson's 
idea.  He  believed  in  a  biological  state  and  did 
everything  in  his  power  to  keep  the  political  agencies 
close  to  the  voter.  The  first  axiom  of  a  natural 
state  should  be  local  autonomy,  and  the  greatest 
possible  degree  of  decentralization. 

Third,  the  Constitution  should  be  easily  changed. 
It  should  be  scarcely  more  sacrosanct  than  the  laws 
of  the  land.  There  is  no  reason  for  fearing  man 
in  his  collective  capacity.  As  a  matter  of  fact,  there 
is  little  that  democracy  could  do  that  would  perma- 
nently or  even  temporarily  injure  any  class  of  the 
community  except  the  class  that  lives  by  exploitation. 
For  a  democratic  society  is  bound  to  be  a  producers' 

[104] 


society,  and  labor-created  wealth  is  perfectly  secure 
in  such  a  society. 

It  is  possible  to  change  our  form  of  government 
only  with  the  greatest  difficulty.  The  American 
Constitution  is  rigid.  It  was  framed  nearly  a  cen- 
tury and  a  half  ago,  by  men  with  no  knowledge  of 
modern  industrial  problems.  Amendment  is  diffi- 
cult. In  some  states  it  is  impossible.  Part  of  this 
was  designed  by  the  framers  of  the  Constitution; 
part  of  it  is  the  result  of  judicial  interpretation,  and 
part  of  it  is  inherent  in  the  bigness  of  the  country. 
It  may  be  that  it  is  impossible  for  a  nation  as  big 
as  our  own  to  govern  itself  as  it  should  be  governed 
through  a  centralized  government.  Certainly,  the 
Constitution  is  unresponsive  to  social  needs.  The 
same  is  true  of  our  state  constitutions. 

Fourth,  there  are  innumerable  checks  to  the  ex- 
pression of  the  popular  will.  The  first  is  the  selec- 
tion of  political  agencies  at  different  times,  for  differ- 
ent periods  and  upon  different  issues.  The  House 
of  Representatives  is  elected  for  two  years.  The 
United  States  Senate  is  elected  for  six  years  and  only 
one-third  of  the  body  is  elected  at  the  same  time. 
The  President  is  elected  for  four  years.  Members 
of  the  Supreme  Court  and  the  District  Courts  are 
appointed  for  life.  A  minimum  period  of  four  years 
must  roll  around  before  the  people  can  enforce  their 
will  or  change  a  government  with  which  they  are  dis- 
satisfied, while  in  practice,  the  issues  before  the  coun- 

[105] 


try  shift  so  radically  from  year  to  year  that  It  is 
almost  impossible  for  the  people  to  so  organize  their 
power  as  to  consistently  carry  through  their  desires. 
It  requires  a  long  period  of  time  to  bring  about 
changes  In  legislation,  and  a  much  longer  period  to 
change  the  Constitution.  A  really  democratic  gov- 
ernment, a  natural  government,  would  shift  as  the 
will  of  the  people  shifted. 

Fifth,  political  and  social  changes  have  to  make 
their  way  over  one  veto  after  another.  Legislation 
must  first  meet  the  approval  of  both  branches  of  the 
legislature.  The  Senate  Is  not  responsive  to  the 
electorate  which  elects  the  members  of  the  House. 
Legislation  must  then  be  approved  by  the  Executive. 
Finally,  If  contested,  it  must  fight  through  the  bar- 
rage of  the  Federal  Courts,  which  involves  from 
three  to  six  years  of  litigation. 

Finally,  every  political  change  and  every  piece  of 
industrial  legislation  must  adjust  Itself  to  a  Consti- 
tution, written  by  men  for  the  most  part  conserva- 
tive, and  with  no  possible  means  of  anticipating  the 
conflict  of  economic  groups  or  the  power  of  privi- 
leged Interests.  In  the  last  analysis,  the  American 
government  Is  In  the  hands  of  men  long  since  dead, 
whose  opinions  we  would  not  accept  on  any  other 
subject  under  the  sun. 

In  one  of  the  Scandinavian  countries,  the  constitu- 
tion provided  for  four  separate  legislative  chambers. 
One  represented  the  big  landowners;  a  second  the 
lesser  landowners;  a  third  represented  the  church, 

[io6] 


and  a  fourth  represented  the  towns  and  commercial 
interests.  Each  of  these  bodies,  as  well  as  the  king, 
had  to  approve  of  every  measure  before  It  became 
a  law.  As  a  result  there  was  deadlock.  Our  own 
system  is  scarcely  less  intolerant  of  change  than  the 
mediaeval  constitution  that  frankly  recognized  eco- 
nomic groups  as  the  basis  of  government. 

These  inhibitions  on  the  freedom  of  the  people 
are  suggestive  of  the  extent  to  which  the  politi- 
cal state  is  founded  on  distrust.  It  is  an  expres- 
sion of  fear.  It  was  designed  to  make  change 
difficult. 

THE    STATE    AND  THE    CITY 

What  is  true  of  the  Federal  Constitution  Is  true 
of  our  states.  As  a  rule  state  legislatures  meet  every 
two  years.  In  many  states  the  length  of  the  session 
is  limited  to  forty  or  sixty  days.  It  is  assumed  that 
the  state  legislature  Is  a  nuisance.  Yet  sessions  of 
this  length  preclude  any  serious  legislation.  It  is 
difficult  for  a  legislative  body  to  organize,  select  its 
officials,  acquaint  itself  with  the  procedure,  much  less 
to  enact  any  serious  measures  in  so  short  a  time. 
This  is  one  reason  why  the  average  legislative  body 
is  a  farce.  State  politics  can  only  be  worked  by  a 
boss.  Control  by  outside  interests  is  inevitable. 
Our  political  system  Invites  It.  It  cannot  be  other- 
wise. 

As  indicative  of  the  unnaturalness  of  our  political 
machinery,  a  measure  for  granting  the  suffrage  to 

[107] 


women,  the  most  natural  of  political  rights,  had  to 
make  its  way  against  every  kind  of  legal  obstacle. 
It  took  three-quarters  of  a  century  to  secure  this 
right,  which  a  natural  society  would  have  granted  as 
a  matter  of  course.  Laws  directed  against  child 
labor  meet  the  same  obstacles,  as  do  other  measures 
for  improving  social  and  political  conditions. 

Fear  of  democracy  extends  to  the  very  sources  of 
political  action.  They  still  further  sabotage  the 
community  and  the  individual  as  well.  Methods  of 
nomination  and  election  reflect  fear.  Nominations 
in  many  states  are  removed  from  direct  control. 
The  blanket  ballot  is  an  additional  difficulty.  There 
are  many  other  obstacles  between  the  voter  and  what 
he  wants. 

This  distrust  Is  carried  still  further  In  local  gov- 
ernment. Our  cities  have  no  home  rule.  They  can 
only  act  by  permission  of  the  state  legislature. 
They  are  frequently  tied  hand  and  foot  by  state  con- 
stitutions. The  municipal  tax  rate  is  limited.  So 
is  the  amount  of  Indebtedness  that  can  be  incurred. 
Only  rarely  are  cities  permitted  to  own  street  rail- 
ways, gas  companies,  electric  lighting  Industries,  or 
means  for  service  to  the  people.  None  of  our  cities 
are  permitted  to  properly  plan  their  development, 
to  control  property.  None  of  them  are  able  to  solve 
the  housing  question  as  it  is  being  solved  in  European 
cities  through  public  loans  or  direct  public  action. 
The  private  corporation  has  far  more  power. 

Most  Important  of  all,  the  city  is  compelled  to 
[io8] 


raise  its  taxes  as  the  state  decides.  It  has  no  free- 
dom in  this,  the  most  important  of  all  functions. 
And  the  laws  of.  the  state  compel  the  cities  to  collect 
their  taxes  as  the  property  interests  desire.  They 
are  not  permitted  to  tax  land  values  or  to  use  the 
taxing  power  for  social  purposes.  The  American 
city,  like  the  American  state,  is  manacled  by  distant 
constitutions,  usually  drafted  by  interests  inimical  to 
democracy. 

OBSTACLES   TO    PROGRESS 

As  a  result  of  these  many  limitations,  any  social 
change  has  to  win  a  half  dozen  battles  before  it  wins 
a  victory.  Inaction  on  the  other  hand  has  to  win 
but  a  single  skirmish.  It  needs  to  control  but  a 
single  political  agency.  If  it  controls  the  courts,  that 
is  a  block  to  progress.  Public  opinion  has  to  strug- 
gle to  the  point  of  exhaustion  to  express  itself  in  legis- 
lature. Democratic  movements  have  to  survive  a 
series  of  elections  to  achieve  their  ends.  A  single  re- 
action in  public  opinion  may  block  progress  for  a 
generation,  through  a  loss  of  some  branch  of  the 
Government,  while  the  courts  may  chain  a  state  or 
the  nation  for  a  generation  by  the  vote  of  a  single 
man,  through  a  mere  majority  opinion.^ 

1  The  enforcement  of  the  Sherman  anti-trust  law  is  an  evidence 
in  point.  Also  the  laws  regulating  railroads  and  public  utility 
corporations  The  state  of  North  Dakota  passed  laws  by  the  initia- 
tive and  referendum,  and  struggled  for  years  merely  to  be  pro- 
tected from  fraudulent  grain  grading  by  millers  and  commission 
men.     For   nearly  ten  years  they  have  been  trying  to  build  itate- 

[109] 


REVERSAL   OF    NATURAL   PRINCIPLES   OF 
GOVERNMENT 

The  American  state  has  reversed  the  principles  of 
life,  of  nature,  of  biology.  We  have  created  an 
artificial  thing.  We  have  provided  a  political  instru- 
ment in  which  fear  is  the  controlling  motive.  We 
have  sabotaged  the  free  expression  of  humanity,  and 
of  talent  and  ability  as  well.  There  is  little  to  lure 
men  of  ability  from  private  life  where  freedom  in- 
vites initiative  and  power,  into  a  system  where  am- 
bition has  so  little  opportunity  to  play. 

This  psychology  of  fear  has  palsied  the  state.  It 
has  palsied  political  effort.  The  average  man  is 
moved  by  the  desire  for  results.  Yet  when  success 
is  subject  to  innumerable  obstacles,  when  the  end  de- 
sired is  distant  and  highly  problematical,  when  the 
fruits  of  effort  are  subject  to  veto  by  officials  unre- 
sponsive to  the  public  will,  initiative  and  effort  are 
discouraged.  It  cannot  be  otherwise.  And  from 
the  earliest  step  in  the  promotion  of  an  idea  to  its 
ultimate  achievement,  one  hurdle  after  another  is 
found  in  the  path,  which  tends  to  paralysis  of  effort 
and  the  paralysis  of  our  social  forces  as  well. 
Herein  is  the  real  explanation  of  the  failure  of 
American  politics.  Herein  is  the  explanation  of  the 
lack  of  political  interest.     America  has  invited  di- 

owned  flour  mills  and  terminals.  Only  within  the  last  few  months 
has  the  United  States  Supreme  Court  released  the  state  from  an 
injunction  against  such  action. 

[IIO] 


rect  industrial  action  by  the  Indirection  of  our  polit- 
ical institutions. 

THE    SACREDNESS    OF   THE    CONSTITUTION 

Moreover  America  Is  almost  alone  In  the  sanctity 
we  have  attached  to  the  written  Constitution.  Re- 
actionary as  is  the  British  Constitution,  it  is  far  more 
fluid  than  Is  our  own.  The  composition  of  the  gov- 
ernment of  Great  Britain  can  be  changed  at  a  single 
election.  The  ministry  Is  elected  by  Parliament. 
It  is  responsive  and  responsible  to  Parliament. 
There  Is  no  Supreme  Court  to  interfere  with  the  will 
of  the  people  once  It  is  finally  imbedded  In  law. 
Even  the  House  of  Lords  has  only  a  suspensive  veto, 
which  can  be  overridden  by  the  more  popular  branch 
of  the  government. 

America  Is  the  only  country  that  has  entrusted  its 
courts  with  power  to  veto  the  acts  of  other  branches 
of  the  government.  No  other  country  has  approved 
the  idea  that  officials  shall  be  subject  to  endless  ob- 
stacles in  carrying  out  their  acts.  America  almost 
alone  assumes  that  indirection  is  to  be  preferred  to 
directness,  and  that  confusion  is  more  to  be  desired 
than  simplicity. 

These  obstacles  to  popular  government  are  not 
accidental.  They  were  designed  by  the  men  who 
drafted  the  Federal  Constitution.  Hamilton  dis- 
trusted democracy.  And  he  carried  his  distrust  as 
far  as  possible  in  the  provisions  of  the  Federal  Con- 
stitution.    He  copied  the  most  reactionary  features 

[.II] 


of  the  British  Constitution.  And  these  provisions 
have  been  given  sanctity  by  the  decisions  of  the 
courts,  which  have  aggrandized  their  power  for 
nearly  a  century. 

FEATURES  OF  A  NATURAL  GOVERNMENT 

These  should  be  the  axioms  of  a  natural  govern- 
ment, a  free  government,  a  government  that  aims 
to  be  responsible  and  responsive  to  the  will  of  the 
people : 

( 1 )  It  should  be  simple  and  easily  understood. 
Issues  should  be  free  from  confusion.  There  should 
be  a  direct  line  of  action  from  the  voter  to  the  ob- 
ject desired.  Once  the  public  has  expressed  its  will, 
it  should  be  carried  into  execution. 

(2)  Governmental  agencies  and  powers  should 
be  close  to  the  people.  There  should  be  a  large  de- 
gree of  local  sovereignty.  Local  agencies  should  be 
free  to  do  as  they  please.  There  should  be  no  limi- 
tations on  the  powers  of  cities,  towns  or  counties. 
They  should  be  free  cities.  The  German  city  has 
such  freedom.  And  Germany  has  produced  the 
greatest  cities  the  modern  world  has  known.  Local 
autonomy  and  decentralization  are  possibly  the  most 
important  needs  in  a  free  state. 

(3)  The  voter  should  act  directly.  There 
should  be  no  intermediaries  such  as  electoral  colleges, 
conventions  and  delegates  between  him  and  his  rep- 
resentative. Officials  should  be  the  servants  of  the 
people,  not  their  masters. 

[112] 


(4)  There  should  always  be  means  of  direct  leg- 
islation through  such  an  agency  as  the  initiative  and 
referendum.  Direct  legislation  should  be  made  easy 
and  simple.  And  any  decision  of  the  people  should 
be  immune  from  interference  by  the  courts. 

(5)  The  Constitution  should  be  scarcely  more 
sacrosanct  than  other  laws.  It  should  be  easily 
changed;  either  by  the  joint  action  of  the  Assembly 
called  for  that  purpose,  or  by  the  direct  action  of 
the  people.  There  is  no  more  reason  why  we  should 
have  two  sets  of  laws  —  one  all  but  impossible  of 
change  —  than  that  we  should  have  two  separate 
agencies  for  the  same  purpose  in  any  relation  of  life. 

We  have  provided  just  such  a  constitution  for 
the  business  corporation.  Its  organization  is  sim- 
ple. It  can  change  its  constitution  and  by-laws  at 
will.  It  determines  for  itself  what  its  executive  or- 
ganization shall  be.  When  the  directors  act  that 
is  the  end  of  the  matter.  They  can  do  anything 
except  make  it  impossible  for  the  corporation  to 
carry  on  the  business  for  which  it  was  created. 
There  is  no  conflict  of  power  and  responsibiUty,  no 
checks  or  balances.  A  business  corporation  would 
go  bankrupt  if  it  were  subject  to  the  endless  checks 
and  delays  that  inhere  in  political  action. 

The  private  corporation  is  a  reflection  of  the  de- 
sires of  business.  It  is  a  natural  instrument  for 
getting  things  done.  It  is  biological  in  its  form.  It 
is  like  a  human  being  in  the  simplicity  of  its  meth- 
ods and  the  directness  of  its  processes. 

[113] 


The  private  corporation  has  greater  freedom  than 
a  sovereign  state  and  more  power  than  a  municipal- 
ity. It  can  borrow  money  as  it  wills;  it  can  spend 
it  as  it  wills;  It  can  carry  on  almost  any  industry 
and  perform  almost  any  service.  The  corporation 
is  a  free  agency.  The  political  state  is  in  chains. 
The  one  is  organized  for  action,  the  other  for  inac- 
tion. This  Is  one  reason  why  the  state  is  inefficient. 
This  is  one  reason  why  the  private  corporation  Is  so 
all  powerful. 

FREEDOM  THE  PROPER  OBJECTIVE  OF 
GOVERNMENT 

A  natural  society  should  be  adjusted  to  the  great- 
est possible  freedom  of  expansion.  It  should  be 
fluid  and  responsive.  It  should  evolve  and  change. 
There  Is  no  more  reason  to  fear  mankind  in  Its  col- 
lective capacity  than  In  Its  Individual  capacity.  Free- 
dom is  the  rule  to  which  political  life  should  adhere. 
For  freedom  Is  the  first  law  of  nature.  It  under- 
lies all  biological  processes.  Freedom  also  explains 
our  achievements.  The  ingenuity,  resourcefulness 
and  courage  of  America  is  traceable  to  freedom. 

And  freedom  is  the  law  of  nature;  a  law  as  Im- 
mutable as  any  law  that  nature  sanctions.  Not  the 
freedom  that  gives  privileges  to  some  and  Imposes 
burdens  on  others;  not  the  freedom  that  refuses  to 
distinguish  between  that  which  is  essentially  public 
and  that  which  Is  essentially  private;  not  the  free- 
dom which  grants  a  license  to  the  corporation  and 

[114] 


chains  to  the  community;  but  the  freedom  of  each 
man  to  Hve  his  Individual  life  so  long  as  he  does  not 
Interfere  with  the  equal  freedom  of  his  fellows  and 
the  equal  right  of  the  community  to  live  Its  life  in 
its  own  way  unrestrained  by  artificial  obstacles. 


[115J 


CHAPTER  XII 

POLITICS 

We  think  of  politics  as  a  struggle  of  individuals 
and  parties  over  fundamental  policies  and  statesmen 
as  the  exponents  of  great  principles.  But  these  are 
the  non-essentials  of  politics,  just  as  they  are  the  non- 
essentials of  history.  Politics  is  a  struggle  to  con- 
trol the  distribution  of  wealth. 

Wealth  is  diverted  from  one  group  to  another  by 
law.  This  is  accomplished  by  legislation  which  con- 
fers privileges  or  some  form  of  monopoly  power. 
Laws  endow  one  group  with  the  right  to  collect 
tribute  from  another  group.  It  is  for  this  that  men 
seek  to  control  government. 

PARTIES   ARE    ECONOMIC    AGENCIES 

Organized  government  is  carried  on  by  parties. 
But  if  we  look  beneath  the  surface  we  find  that  politi- 
cal parties  are  agencies  of  economic  groups,  repre- 
senting different  kinds  of  wealth,  and  seeking  differ- 
ent kinds  of  privileges.     This  is  true  of  all  nations. 

In  Europe  the  contending  parties  are  the  old 
landed  aristocracy  on  the  one  hand,  and  the  new 

[ii6] 


industrial  and  financial  bourgeoisie  on  the  other. 
The  history  of  the  nineteenth  century  is  a  history  of 
the  struggle  of  these  two  groups.  They  contend 
for  principles  as  those  principles  fall  in  with  their 
economic  interests.  But  their  principles  always  re- 
flect their  economic  interests. 

In  England,  the  Conservative  Party  is  a  land- 
lords' party  while  the  Liberal  Party  is  a  party  of  the 
bourgeoisie.  But  the  landed  class  is  always  su- 
preme. It  never  loses  power.  It  controls  the 
House  of  Lords.  It  controls  the  House  of  Com- 
mons as  well.  It  controls  the  administrative 
agencies  of  the  government. 

In  France  the  ruling  group  is  also  economic.  It 
is  financial.  The  power  which  rules  France  is  the 
banks  of  Paris.  The  Paris  banks  are  interlaced  with 
millions  of  peasants  to  whom  they  have  sold  billions 
of  securities  of  foreign  governments.  This  has 
identified  the  peasants  with  the  bankers.  The  bank- 
ers control  the  press;  they  shape  the  foreign  policy. 
They  shape  the  domestic  policy  as  well. 

In  pre-war  Germany  it  was  the  Junker  landowner 
and  the  industrial  trusts,  combined  with  the  big 
banks,  the  Deutsche  Bank,  the  Dresdener  Bank,  the 
Darmstater  Bank  and  Disconto  Gesellschaft,  that 
ruled  Germany  and  brought  her  to  ruin. 

In  Denmark  a  different  class  is  in  control.  It  is 
the  peasant  class.  It  owns  and  rules.  For  89  per 
cent  of  the  farmers  of  Denmark  are  home  owners. 
In  Australia  it  is  the  middle-class  farmer  and  the 

["7] 


workers  that  own  the  country  and  rule  it.  Those 
who  own  a  country  rule  it,  and  those  who  rule  it  own 
it  as  well. 

ECONOMIC    POWER    CONFERS    POLITICAL    POWER 

In  every  age  and  in  every  country,  politics  reflects 
the  will  of  the  class  that  is  economically  the  most 
powerful.  This  was  true  in  ancient  Greece  as  it 
was  in  ancient  Rome.  It  was  true  in  the  mediaeval 
Italian  cities.  It  is  true  in  Europe  to-day.  The 
state  is  an  economic,  not  a  political  thing.  The 
state  is  an  agency  of  an  economic  class.  It  is  little 
more. 

The  long  struggles  of  the  British  kings  with  the 
lords  were  economic  struggles.  They  were  not 
struggles  for  liberty.  Neither  the  king  nor  the 
barons  were  interested  in  the  people  of  England. 
They  were  interested  in  the  distribution  of  taxes. 
Should  the  king  collect  his  revenues  from  the  land- 
lords through  feudal  dues,  or  should  the  landlords 
and  the  king  join  hands  and  shift  the  tax  burden  on 
to  the  common  people?  These  and  other  struggles 
over  the  land  were  the  controlling  issues  of  Great 
Britain  for  seven  centuries. 

To-day  the  essentials  of  politics  are  the  same. 
Political  parties,  tory  and  liberal,  are  agencies  to 
further  the  interests  of  the  landed  and  the  commer- 
cial classes.  Only  within  the  last  few  years  has  a 
labor  or  producers'  party  risen  to  challenge  their 
power. 

[ii8] 


Politics  in  America  reflects  the  same  economic 
struggle.  Prior  to  the  Civil  War  the  Democratic 
party  represented  the  slave  owners  and  cotton 
growers.  To-day  it  represents  the  plantation  own- 
ers of  the  South  and  the  small  business  men  of  the 
North.  The  Republican  party  is  a  party  of  high 
finance.  It  represents  privilege  in  all  of  its  forms. 
As  an  evidence  of  the  artificiality  of  party  organiza- 
tions, we  see  the  old  parties  coming  together  when 
threatened  by  a  producers'  party.  The  Republicans 
and  Democrats  joined  hands  in  North  Dakota  and 
Minnesota  to  defeat  the  Nonpartisan  League.  In 
New  York  City  and  Milwaukee,  they  joined  hands 
to  prevent  the  Socialists  from  electing  their  repre- 
sentatives. The  Assembly  at  Albany,  without  re- 
gard for  party,  recently  expelled  the  Socialist  mem- 
bers, and  passed  a  bill  whose  object  was  the  exclusion 
of  Socialists  from  representation  in  the  government. 
In  England,  Conservatives  and  Liberals  unite  to  de- 
feat candidates  of  the  Labor  Party.  Wherever  a 
producers'  group  threatens  the  power  of  privilege, 
the  old  parties  bury  their  differences  in  order  to 
prevent  it  from  coming  into  power. 

HISTORY   OF   PARTIES 

America  is  no  exception  to  this  economic  interpre- 
tation of  politics.  Up  to  about  1880,  the  politics  of 
America  reflected  a  free  society.  The  official  class 
was  drawn  from  agriculture,  from  industry,  and 
from  the  legal  profession  which  represented  these 

["9] 


classes.  Wealth  was  fairly  well  distributed.  There 
were  few  law-made  privileges.  There  was  little 
caste.  Society  was  organized  to  encourage  equality 
of  opportunity.  And  the  contending  parties  repre- 
sented the  economic  structure  of  the  state. 

For  two  and  a  half  centuries  we  had  a  political 
state  that  mirrored  a  free  economic  state.  Alexan- 
der Hamilton,  it  is  true,  had  used  the  government 
to  create  privileges  of  various  kinds.  He  was  re- 
sponsible for  the  protective  tariff,  for  a  national 
bank,  and  for  the  centralization  of  government. 
These  measures  may  have  been  justified  by  the  emer- 
gencies of  a  new  and  a  loosely  knit  federation.  The 
privileges  and  tendencies  established  by  him  were 
swept  away  by  the  election  of  Jefferson,  and  from 
this  time  down  to  the  close  of  the  Civil  War,  privi- 
lege, aside  from  negro  slavery,  exercised  but  little 
influence  on  the  nation.  The  tariff  was  kept  at  a 
low  level.  The  public  lands  were  distributed  to  ac- 
tual settlers.  The  philosophy  which  prevailed  was 
that  of  state  rights,  decentralization  of  government, 
and  freedom  of  action  and  equality  of  opportunity 
to  the  individual  man.  The  federal  expenditures 
were  kept  at  a  minimum.  They  amounted  to  only 
$63,000,000  in  1 86 1.  There  was  a  small  army  and 
navy.  There  was  no  demand  for  a  military  estab- 
lishment. 


[120] 


THE    CIVIL    WAR 

The  opportunities  of  the  Civil  War,  Hke  the  great 
war  just  closed,  gave  birth  to  an  exploiting  class. 
The  Republican  party  demanded  a  protective  tariff. 
The  necessities  of  the  treasury  gave  the  protected 
industries  an  opportunity  to  go  the  limit  in  protective 
legislation.  When  the  war  was  over  this  class  was 
too  powerful  to  be  dislodged.  The  national  banks 
which  had  aided  the  Government  during  the  war, 
were  interlaced  with  the  Treasury  Department. 
The  Pacific  railroads  came  forward  with  plans  for 
transcontinental  railroads.  They  made  inroads  on 
the  public  domain,  and  obtained  130,000,000  acres 
as  an  aid  to  their  construction.  As  time  went  on, 
these  interests  were  merged  into  what  was  a  single 
economic  group.  It  ramified  into  states  and  cities 
in  connection  with  public  utility  corporations,  pro- 
moted and  ultimately  owned  by  the  same  financial 
interests. 

In  recent  years,  the  exploiting  class  has  been  grow- 
ing more  and  more  powerful.  It  has  added  to  its 
wealth  and  to  its  political  power  as  well.  It  fas- 
tened its  hold  upon  our  municipal  life,  upon  our 
states,  and  upon  the  nation  as  well. 

RISE    OF    FINANCIAL   GROUPS    TO    POWER 

About  1900,  these  economic  interests  began  to  be 
closely  interlocked,  politically  and  financially,  by 
common   directors.     Their   oflices   were   moved   to 

[121] 


New  York.  They  became  in  effect  a  nation-wide 
syndicate,  controlled  by  four  or  five  banking  groups, 
whose  ramifications  ran  Into  insurance  companies, 
transportation,  mining,  and  other  monopolies. 
They  control  all  of  the  major  trusts.  The  extent  of 
this  concentration  of  banking  and  Industrial  control 
is  indicated  in  the  report  of  the  Pujo  investigating 
committee  to  Congress  in  19 13,  which  made  an  in- 
quiry Into  "  Concentration  and  Control  of  Money 
and  Credit." 

From  1865  to  19 14  political  power  has  gradu- 
ally passed  from  the  producing  to  this  new  exploit- 
ing group.  It  is  a  financial  group.  It  is  identified 
with  Treasury  operations.  It  maintains  the  protec- 
tive tariff.  It  controls  railroads,  mines,  public  service 
corporations  all  over  the  country.  It  protects  the 
great  trusts  from  interference.  Most  important  of 
all,  it  aims  to  control  taxation.  It  seeks  to  shift 
the  burden  of  taxes  from  wealth  to  consumption.  It 
is  identified  with  indirect,  as  opposed  to  direct  taxes. 
It  opposes  the  income  and  Inheritance  taxes  and 
stands  solidly  for  customs  and  excise  taxes.  It  is 
now  seeking  to  shift  the  burdens  of  war  taxation 
from  direct  taxes  on  to  taxes  on  sales.  The  power 
of  these  interests  was  manifested  in  the  recently 
enacted  railroad  bill;  in  its  opposition  to  the  Federal 
Reserve  Banking  Act.  It  is  active  in  water-power 
legislation,  and  legislation  looking  to  the  disposition 
of  the  public  lands.  It  uses  its  power  to  secure  a 
great  army  and  a  powerful  navy;  to  promote  inter- 

[122] 


national  finance  and  imperialism.  The  suppression 
of  freedom  of  speech,  the  sedition  bills  before  Con- 
gress, the  use  of  the  injunction  against  labor,  and  the 
control  of  the  policing  and  the  military  power  for 
the  suppression  of  protest,  is  symptomatic  of  the 
power  and  the  purposes  of  privilege  in  politics. 

This  briefly  is  the  history  of  the  use  of  govern- 
ment as  an  agency  of  economic  privilege.  The  Re- 
publican party  is  identified  with  the  exploiting  finan- 
cial group.  The  Democratic  party  is  primarily  in- 
terested in  the  economic  interests  of  the  South  and 
in  the  suppression  of  the  negro.  Exploitation,  as 
opposed  to  production,  is  the  controlling  motive  of 
both  parties.  They  both  use  the  Government  as 
an  agency  for  the  distribution  of  wealth.  They  are 
at  one  in  their  hostility  to  labor  and  to  the  farmer 
who  are  unrepresented  in  politics. 

CONGRESS 

In  the  congressional  election  in  191 8  privilege  was 
swept  into  almost  absolute  power  in  both  houses  of 
Congress.  There  is  scarcely  a  score  of  men  in  the 
Senate  and  the  House  of  Representatives  who  rep- 
resent the  interests  of  the  producing  groups.  There 
are  285  lawyers  in  the  present  Congress.  They 
carry  into  political  life  the  interests  of  their  former 
clients.  There  are  scores  of  bankers  in  Congress. 
The  South  is  represented  almost  exclusively  by  the 
plantation-owning  type,  and  by  lawyers,  while  the 
West   is    represented   by   landlords,    mine    owners, 

[123] 


editors,  lawyers,  and  other  representatives  of  privi- 
leged interests.  Whereas  two  generations  ago 
American  politics  represented  the  interests  of  the 
farmer  and  the  small  manufacturer,  to-day  the  pro- 
ducing groups  are  almost  unrepresented.  They 
have  little  voice  in  the  affairs  of  government,  and 
are  only  tolerated  by  the  ruling  groups  in  both  houses 
of  Congress.  The  transformation  of  government  is 
complete. 

The  producing  groups  are  allowed  to  retain  only 
so  much  of  the  wealth  that  they  produce,  as  the  ex- 
ploiting classes  are  unable  to  take  from  them.  The 
right  of  labor  to  strike  is  being  taken  away  by  the 
arbitrary  acts  of  executive  officials  and  of  Congress. 
The  Attorney  General  and  members  of  the  Senate 
have  sought  to  enact  laws  to  make  strikes  unlawful, 
while  the  sedition  bills  before  Congress  were  said  to 
be  so  worded  as  to  make  striking  workers  outlaws, 
subject  to  criminal  prosecution. 

In  America  as  in  old  Europe  the  political  state 
has  been  taken  over  by  an  economic  group.  It  has 
become  a  private  thing.  It  is  used  to  protect  pri- 
vate interests.  It  has  little  concern  for  human 
rights  or  for  the  promotion  of  comfort,  happiness 
and  convenience  for  the  people.  The  state  has  be- 
come an  almost  exclusive  agency  of  privilege.  It  is 
an  agency  of  a  class  that  creates  wealth  by  law  and 
then  uses  the  state  to  protect  the  wealth  so  created. 
It  is  because  of  the  control  of  the  state  by  the  ex- 
ploiting, parasitical  class  that  poverty  exists  in  the 

[124] 


midst  of  plenty,  that  two  per  cent,  of  the  people 
own  sixty  per  cent,  of  the  wealth,  that  banking  agen- 
cies have  been  able  to  secure  such  complete  control 
of  the  credit  and  wealth  of  the  nation.  It  Is  because 
of  such  control  that  the  means  of  transportation 
have  been  passed  over  to  banking  control,  that  mon- 
ster monopolies  have  been  reared,  that  the  mines, 
standing  timber,  oil  and  land  of  the  nation  has  be- 
come the  private  possessions  of  a  handful  of  men. 
These  are  some  of  the  costs  of  the  control  of  the 
nation  by  an  economic  class  which  controls  political 
parties.  Congress  and  the  courts  and  that  makes  and 
molds  public  opinion  through  the  press  for  the  main- 
tenance of  its  power. 

FUNDAMENTALS    OF    POLITICS 

Herein  Is  the  real  Issue  of  all  politics.  It  Is  be- 
tween the  producing  and  the  exploiting  groups. 
The  producers  aim  to  keep  the  wealth  which  they 
produce;  the  exploiters  aim  to  take  it  from  them. 
The  workers  and  the  farmers  desire  freedom  from 
extortion,  cheap  and  open  means  of  transportation, 
the  control  of  credit  and  marketing  In  the  interest  of 
the  producing  and  the  consuming  classes.  Their 
interest  lies  with  freedom  in  trade  and  In  Industry. 
They  are  opposed  to  customs  and  excise  taxes,  taxes 
on  sales,  and  to  the  protective  tariff. 

Almost  all  of  the  Issues  before  the  country  are 
between  the  producing  and  exploiting  groups.  The 
producers  are  in  the  great  majority,  but  are  split 

[125] 


asunder  between  two  parties,  neither  of  which  rep- 
resents their  Interests.  The  exploiting  groups  are 
well  organized.  They  are  sympathetically  related. 
They  are  readily  responsive  to  a  call  which  is  parti- 
san or  bi-partisan  as  the  necessities  of  the  occasion 
may  demand. 

The  real  issue  In  American  politics  should  be  be- 
tween economic  classes  about  economic  Issues.  The 
line  of  party  cleavage  should  be  between  those  who 
produce  wealth  and  those  who  seek  to  appropriate  it. 
Until  this  issue  Is  recognized,  until  parties  divide 
along  these  natural  lines,  there  will  be  no  vital  politi- 
cal system  in  this  or  any  other  country. 


[126] 


CHAPTER  XIII 

OVERHEAD 

The  political  state  not  only  sabotages  the  produc- 
tion of  wealth;  it  transfers  a  constantly  increasing 
share  of  the  restricted  output  from  one  class  to  an- 
other. This  is  another  form  of  sabotage.  It  dis- 
courages effort  as  it  did  in  the  old  regime  when  the 
peasant  found  that  increased  effort  resulted  only  in 
increased  rent  and  higher  taxes.  There  is  less  and 
less  wealth  to  go  around  while  an  increasing  portion 
of  the  wealth  produced  is  absorbed  in  overhead  by 
those  who  do  not  produce  it.  This  transfer  of 
wealth  is  a  result  of  the  control  of  the  state  by  a 
non-producing,  privileged  class. 

The  budget  of  a  country  Is  a  mirror  of  the  kind  of 
government  that  prevails.  A  democratic  society 
spends  generously  for  democratic  purposes;  for  edu- 
cation; for  the  promotion  of  the  comfort  and  well- 
being  of  the  people.  We  find  examples  of  this  in 
Australia,  in  Denmark,  and  in  Switzerland.  A 
privileged  society  spends  lavishly  for  policing, 
for  the  army  and  the  navy,  for  spectacular  displays 
of  force.     Privilege  fears  for  its  unstable  privileges. 

[127] 


It  fears  education.  It  fears  protest.  It  has  a  mor- 
bid apprehension  of  revolution.  Fear  is  the  normal 
psychology  of  a  parasitical  society.  And  fear  leads 
to  extravagant  expenditures  for  agencies  of  force 
both  at  home  and  abroad.  Alien  capitalism  de- 
mands a  large  navy  to  protect  its  imperialistic  in- 
vestments, while  the  financial  interests  demand  a  big 
military  establishment  for  the  maintenance  of  order 
at  home.  The  present  Congress  reflects  the  hys- 
teria and  fear  of  the  capitalistic  classes.  The  colos- 
sal federal  budget  is  born  of  the  psychology  of  fear 
and  force. ^ 

TAXES 

Taxes  are  the  first  of  the  overhead  charges  on 
society.  They  were  a  negligible  burden  up  to  forty 
years  ago.  Taxes  have  been  enormously  increased 
as  a  result  of  the  war.  Whereas  in  19 13  the  federal 
budget  amounted  to  a  billion  dollars  a  year,  it  is 
now  more  than  five  times  that  figure,  and  may  amount 
to  eight  times  that  figure.  In  19 14  the  federal  tax 
burden  was  but  $50  per  family,  whereas  to-day  it 
amounts  to  $250  per  family.  Our  federal  taxes 
alone  absorb  from  one-sixth  to  one-fifth  of  the  in- 
come of  the  average  worker.  Even  this  is  below  the 
burden  actually  borne,  for  customs  taxes,  excise  taxes, 
and  even  the  excess  profits  taxes  cumulate  over  and 

1  The  psychology  of  the  political  state  is  mirrored  in  the  Con- 
gressional budget  for  1920.  As  shown  in  Chapter  XVI  92.8%  of 
our  total  expenditures  are  for  past  wars  and  the  maintenance  of 
the  war  and  navy  departments. 

[128] 


over  again  before  they  are  paid  by  the  consumer. 
They  are  also  regressive  taxes.  They  are  borne 
by  those  least  able  to  carry  them. 

The  budget  of  the  City  of  New  York,  which  was 
something  over  $200,000,000  in  19 12,  is  now  in 
excess  of  $350,000,000.  It  has  increased  75  per 
cent,  in  seven  years'  time.  It  is  likely  to  go  much 
higher.  The  budget  for  New  York  State  exceeds 
$125,000,000.  Increased  living  costs  are  forcing 
up  wages  of  teachers,  policemen,  firemen  and  other 
municipal  employees.  It  has  raised  the  cost  of  all 
improvements.  Within  the  next  few  years,  munici- 
pal and  state  taxes  are  likely  to  be  increased  by  at 
least  100  per  cent,  over  what  they  were  in  19 14. 
The  tax  burden  of  America  is  not  far  from  ten  bil- 
lion dollars,  or  nearly  one-seventh  of  the  total  wealth 
produced.  With  the  soldiers'  bonus,  the  railway 
deficits  and  other  demands,  the  total  burden  may  be 
increased  to  more  than  twelve  billion  dollars.  A 
great  part  of  this  is  a  war  burden.  It  is  for  interest, 
military,  naval  and  other  non-productive  purposes. 
For  this  expenditure  society  receives  little  return  In 
services.  It  Is  a  privileged  expenditure  Imposed  on 
society  by  the  class  in  control  of  the  state.  Nearly 
one-seventh  of  the  currently  created  wealth  Is  being 
taken  by  the  state.  It  is  taken  from  capital  and 
from  labor.  It  yields  no  return.  It  diminishes 
wealth  production.  It  Impoverishes  the  people  and 
reduces  their  power  to  produce  and  to  consume  as 
well. 

[129] 


PROFITS 

Profits,  Interest  and  rent  are  other  forms  of  over- 
head. Interest  Is  a  return  on  savings.  In  a  free 
society  It  Is  fixed  by  the  competition  of  capital  seek- 
ing Investment.  Prior  to  the  war,  the  normal  re- 
turn on  capital,  where  the  element  of  risk  did  not 
enter,  was  between  four  and  five  per  cent.  Three 
and  four  per  cent.  Is  still  the  savings  bank  return 
to  depositors. 

In  a  normal  society.  Interest  is  a  proper  charge  on 
production.     It  need  not  be  a  serious  burden. 

Up  to  about  1890,  interest  and  profits  were  kept 
down  by  competition.  They  were  a  negligible  bur- 
den on  the  consumer.  With  the  monopolization  of 
Industry  in  the  nineties,  prices  and  profits  were  in- 
creased. They  were  not  a  return  on  capital  in  the 
form  of  Interest;  they  were  a  tribute  exacted  by 
monopoly  to  maintain  an  artificial  security  structure 
of  the  monopolized  Industries.  These  monopoly 
profits  soon  became  fixed  as  normal  profits.  Be- 
tween 1890  and  1905  billions  of  new  securities  were 
sold  by  the  banks  which  brought  the  monopolies  into 
existence.  To  give  these  securities  value,  prices  had 
to  be  increased.  These  price  increases  had  to  be 
maintained  because  of  the  speculative  securities 
structure  which  had  been  erected.  By  19 14  this  arti- 
ficial scale  of  prices  and  profits  had  become  perma- 
nent. Compared  with  conditions  of  twenty  years 
before,  profits  had  become  a  colossal  burden.     They 

[130] 


absorbed  a  great  part  of  the  current  wealth.  For 
these  profits  society  received  no  return.  They  were 
not  an  interest  charge.  Nor  were  they  payment  for 
organizing  or  administrative  skill.  They  were  trib- 
ute taken  through  monopoly  control  of  basic  in- 
dustries, which  for  the  most  part,  enjoyed  privileges 
from  the  government  through  the  tariff,  transporta- 
tion, patent  rights,  the  control  of  land,  minerals  and 
credit  agencies. 

THE    WAR 

The  Great  War  increased  these  monopoly  profits 
still  further.  This  was  particularly  true  of  coal,  of 
food,  of  iron,  of  copper,  of  oil,  of  the  munition 
plants,  of  all  industries  benefitted  by  the  war.  Some 
indication  of  the  extent  to  which  the  overhead 
charges  of  society  were  increased  is  indicated  by  of- 
ficial investigations.  Senate  Document  No.  259  was 
a  report  from  the  Secretary  of  the  Treasury  in  re- 
sponse to  a  Senate  Resolution  demanding  informa- 
tion on  this  subject.  Briefly  summarized,  this  re- 
port showed  among  other  things  the  following: 

Profits  of  coal  operators  as  stated  by  Secretary 
McAdoo,  ran  as  high  as  2,000  per  cent.  Nearly 
half  the  coal  companies  earned  profits  on  their  capital 
stock  ranging  from  100  per  cent,  to  as  high  as  several 
thousand  per  cent.  In  an  analysis  of  this  report 
made  by  Basil  M.  Manly,  formerly  of  the  War  La- 
bor Board,  which  appeared  in  the  Searchlight  for 
April,   1920,  it  is  stated  that  the  American  people 

[131] 


paid  profits  equal  to  the  entire  capital  stock  of  half 
the  mines  reported.  The  net  income  of  404  coal 
companies  was  $78,000,000,  or  nearly  45  per  cent, 
on  their  total  capital  stock,  both  bona  fide  and 
water.  Mr.  Manly  says:  "  Making  due  allowance 
for  smaller  profits  in  19 18  and  19 19,  it  is  absolutely 
certain  that  it  would  have  been  cheaper  for  the 
American  people  to  have  bought  the  coal  mines  out- 
right when  we  entered  the  war  so  that  coal  could 
have  been  sold  to  people  at  a  low  cost,  than  to  have 
paid  the  enormous  profits  of  the  last  three  years. 
To  put  the  matter  in  a  different  way,  in  the  last  three 
years  the  American  people  have  paid  in  net  profits 
every  dollar's  worth  of  stock  of  the  coal  companies." 

Food  speculators,  canners,  etc.,  made  as  much  as 
2,000  per  cent.;  owners  of  woolen  mills  as  much  as 
1,770  per  cent.;  the  furniture  manufacturers  as  much 
as  3,295  per  cent. 

The  steel  corporations  made  colossal  profits. 
"  One  corporation,"  says  Mr.  Manly,  "  made  net 
profits  for  the  two  years  19 16-17,  after  the  payment 
of  interest  on  bonds  and  other  allowances  for  all 
charges  growing  out  of  the  installation  of  special  war 
facilities  "  amounting  to  $888,931,51 1.  The  Comp- 
troller of  the  Currency  in  a  special  investigation  of 
the  subject,  says  that  the  United  States  Steel  Cor- 
poration could  have  doubled  the  wages  and  salaries 
of  every  one  of  its  employees,  salaried  as  well  as 
wage  earners,  and  still  have  paid  a  handsome  return 
on  the  capital  stock  and  set  aside  a  substantial  sum 

[132] 


for  reserves.  Or  it  could  have  reduced  the  price  of 
steel  by  $30  a  ton  and  still  have  made  very  substan- 
tial profits. 

The  Senate  Document  shows  that  out  of  122 
meat  packers,  one-fourth  made  more  than  100  per 
cent,  profit  on  their  capital  stock.  One  corporation 
with  a  capital  stock  of  $1,000,000  made  a  net  in- 
come in  1917  of  $49,139,147.  Even  after  the  pay- 
ment of  all  income  and  excess  profits  taxes  it  still 
had  a  profit  of  $43,810,984. 

This  is  Mr.  Manly's  conclusion  after  investigat- 
ing the  report.     He  says  : 

"  The  fact  is  —  and  this  report  of  the  Treasury 
Department  proves  it  beyond  any  doubt  —  that  the 
American  people  during  the  war  did  pay  in  net  prof- 
its for  the  entire  capital  stock  of  the  corporations 
in  the  essential  lines  of  industry  and  trade." 

Continuing,  he  says:  "  In  other  words,  it  is  clear 
that  if  the  national  Government  at  the  beginning  of 
the  war  had  taken  over  the  essential  lines  of  indus- 
try, and  the  American  people  had  been  required  to 
pay  the  prices  which  private  manufacturers  and  mer- 
chants have  charged  them,  there  would  have  been 
sufficient  profit  to  pay  for  every  dollar's  worth  of 
capital  stock,  and  leave  the  nation  to-day  in  posses- 
sion and  control  of  practically  all  its  manufacturing 
plants. 

"  If  this  had  been  done,  and  the  manufacturing  of- 
ficials and  employes  had  performed  their  duties  as 
efficiently  for  the  Government  as  for  the  private 

[133] 


corporations  —  and  every  citizen  has  a  right  to  as- 
sume that  neither  the  manufacturing  officials  nor  the 
other  employes  would  deliberately  sabotage  their 
Government  —  we  should  have  to-day,  instead  of  a 
debt  of  $26,000,000,000,  a  large  part  of  which  went 
to  pay  for  the  products  of  these  Industries,  a  debt 
of  only  the  billions  necessary  to  cover  the  expenses  of 
our  Government,  the  pay  of  our  soldiers,  and  the 
loans  to  our  allies.  In  addition  we  should  have 
vested  in  the  Federal  Government  the  ownership  of 
billions  of  dollars'  worth  of  manufacturing  com- 
mercial property.  This  opportunity  now  seems  to 
be  lost,  but  the  picture  of  American  profiteering  re- 
vealed by  this  official  document  of  the  Treasury  De- 
partment should  be  indelibly  fixed  in  the  mind  of 
every  American  citizen." 

A  similar  independent  inquiry  of  war  profiteering 
was  made  by  W.  Jett  Lauck  and  presented  to  the 
United  States  Railroad  Labor  Board  in  the  railway 
wages  hearings.  The  report  which  he  presented 
disclosed : 

( I )  The  corporations  of  the  country  earned  in  net 
profits  approximately  $4,800,000  more  each  year 
for  the  three  years  1916,  1917,  1918  than  they  did 
during  the  three  years  that  preceded  the  war.  In 
other  words,  their  net  profits  were  almost  $15,000,- 
000,000  more  than  they  had  been  in  the  three  pre- 
war years.  Reduced  to  an  Individual  basis,  this 
meant  a  profit  of  $240  from  every  family  of  five  in 
the  nation. 

[134] 


(2)  These  corporations  earned  enough  In  profits 
to  replace  the  entire  value  of  their  capital  stock  and 
their  entire  investment,  in  a  little  over  four  years' 
time. 

(3)  The  coal  operators  increased  the  price  of 
coal  four  times  as  much  as  the  increase  in  labor  cost. 
They  made  a  clear  profit  of  more  than  $1,000,000,- 
000  in  four  years'  time. 

(4)  Since  the  war  new  profiteers  have  come  in; 
profiteers  in  clothing,  food,  household  supplies,  and 
other  staple  necessities.  Price  advances  since  the 
war  have  in  many  instances  been  greater  than  during 
the  war. 

The  report  of  Mr.  Lauck  concludes:  "  Viewed  as 
a  pure  economic  proposition,  in  the  light  of  economic 
history,  no  sane  man  can  fail  to  realize  that  the 
present  situation  in  the  United  States  marks  the 
gravest  crisis  the  nation  has  confronted  since  the 
Union  was  threatened  In  i860." 

"  Probably  the  most  aggravating  factor  in  the  sit- 
uation from  the  labor  standpoint  Is  that  the  same 
powerful  interests  which  have  been  and  are  so  mani- 
festly exploiting  the  needs  of  the  public  and  the  toil 
of  the  workers,  are  the  same  interests  which  have 
embarked  upon  a  deliberate  campaign  of  propaganda 
and  misrepresentation  to  fasten  upon  labor  the  re- 
sponsibility for  high  prices;  In  other  words,  to  play 
off  the  two  sets  of  victims,  the  public  and  the 
workers,  against  each  other." 

"  It  cannot  be  denied  that  this  effort,  plain  to  the 

[135] 


worker  who  struggles  to  maintain  his  family  de- 
cently is  daily  becoming  more  precarious,  is  fanning 
the  flames  of  discontent,  and  making  the  United 
States  a  fertile  field  for  the  propagandists  of  violent 
economic  revolution." 

The  overhead  of  society  expresses  itself  in  other 
wasteful  ways.  It  expresses  itself  in  extravagant 
display,  in  wasteful  effort.  The  amount  of  money 
spent  on  advertising  before  the  war  amounted  to 
$1,000,000,000  a  year.  Nearly  as  much  more  was 
spent  for  oral  and  other  kinds  of  persuasive  sales- 
manship. This  was  three  times  the  cost  of  educa- 
tion in  elementary,  secondary,  professional  schools, 
colleges  and  universities,  for  which  the  total  expen- 
diture in  19 13  was  only  $704,082,295.  Advertis- 
ing costs  to-day  are  probably  two  or  three  times  the 
pre-war  expenditure. 

These  war  profits  and  post-war  profits  bear  little 
relation  to  labor  cost.  They  are  profiteering  pure 
and  simple.  In  the  report  submitted  by  Mr.  Lauck, 
referred  to,  it  was  shown  that  while  shoes  had  ad- 
vanced $3.50  in  price,  labor  had  received  only  15 
cents  of  the  increase,  A  similar  showing  was  made 
as  to  clothes,  as  to  coal,  as  to  railway  transportation 
cost,  as  they  affected  individual  commodities.  The 
labor  increase  in  iron  and  steel  products,  in  copper, 
oil  and  gasohne,  in  lumber  and  print  paper,  bore  no 
relation  to  the  arbitary  increases  in  price.  They 
were  the  result  of  monopoly  power,  arbitrarily  used 
under  the  protection  of  the  Government  and  the 

[136] 


privileges  the  Government  has  conferred  upon  those 
who  control  the  basic  industries  and  services  of  the 
nation. 

The  new  scale  of  war  profits  has  now  become  fixed 
as  normal  profits.  It  is  far  in  excess  of  a  proper  re- 
turn on  capital.  It  bears  no  necessary  relation  to 
cost  of  production.  This  profit  level  is  a  monopoly 
profit,  pure  and  simple.  It  is  fixed  by  what  the  traf- 
fic will  bear. 

GROUND    RENT 

Ground  rent  is  the  third  overhead  charge  on  so- 
ciety. It  has  been  increasing  with  great  rapidity. 
This  is  true  of  agricultural,  as  it  is  of  urban  rents. 
There  is  no  possible  justification  for  this  increase. 
There  has  been  no  labor  added  to  land.  Nor  have 
the  taxes  on  land  been  increased.  Ground  rent  is 
tribute  pure  and  simple. 

Ground  rent  is  payment  for  speculative  land 
values,  which  have  shot  up  at  an  unparalleled  rate 
during  the  last  few  years.  As  a  result  of  the  con- 
gestion of  our  cities,  and  the  checking  of  building 
operations,  rents  have  advanced  to  prohibitive  fig- 
ures. They  are  limited  only  by  the  ability  of  the 
people  to  pay.  The  result  has  been  fewer  rooms 
for  families,  less  desirable  homes,  a  curtailment  of 
comforts  by  all,  save  the  rich  and  well  to  do.  This 
rent  increase  has  been  highest  where  the  pressure  of 
war  industry  has  been  most  severe.  The  control  of 
rent   profiteering  by   rent   legislation   has    scarcely 

[137] 


touched  the  evil.  High  rents  are  affecting  mar- 
riages. They  are  checking  the  birth  rate.  They 
are  attacking  the  professional  classes,  teachers  and 
persons  of  fixed  income. 

Agricultural  rents  have  also  advanced  with  in- 
creasing land  values  and  food  prices.  In  Iowa,  Illi- 
nois, and  Kansas,  land  values  have  been  pyramided 
by  land  speculators  until  they  have  reached  dizzy 
heights.  War  prices  for  farm  products  made  it  pos- 
sible for  farm  tenants  to  pay  high  rents.  These 
rents  have  been  capitalized  by  landlords.  The  land 
of  America  has  been  artificially  increased  in  value  by 
many  billions  of  dollars,  and  land  has  been  sold  and 
mortgaged  on  this  new  basis.  Farm  rents  in  Iowa 
and  Illinois  have  been  doubled  and  trebled  in  the 
process. 

BURDEN    ON    PRODUCERS 

The  overhead  charges  of  taxes,  profits  and  rent 
are  measured  in  tens  of  billions  of  dollars.  The  tax 
burden  alone,  with  its  accumulated  accretions, 
amounts  to  from  ten  to  fifteen  billion  dollars  a  year; 
rents,  royalties  and  payments  for  the  land,  probably 
amount  to  ten  billion  dollars  additional,  and  exces- 
sive profits  to  as  much  more.  The  total  overhead 
of  America,  with  the  cost  of  maintaining  the  army 
of  exploiters  and  parasites  which  it  involves,  is 
from  one-third  to  one-half  the  total  wealth  pro- 
duced. 

The  producing  classes  are  staggering  under  this 

[138] 


colossal  overhead  of  taxes,  profits  and  rent,  which  Is 
relatively  new  to  America.  It  has  come  upon  us 
during  the  present  generation.  It  was  unknown  to 
our  fathers.  For  this  overhead  society  receives 
little  or  no  return.  It  adds  little  to  the  comforts, 
the  convenience,  the  happiness  of  society.  It  en- 
riches society  no  more  than  did  the  services  ren- 
dered by  the  serf  to  the  seigneur  In  the  old  regime. 
The  privileged  classes  return  no  services  for  the 
tribute  which  they  collect. 

This  overhead  is  taken  by  those  who  own  from 
those  who  toil.  Labor  seeks  to  meet  its  increased 
burden  by  collective  bargaining  or  by  strikes.  Yet 
labor  In  the  aggregate  does  not  and  cannot  keep  up 
with  the  increased  overhead  charges.  Labor  may 
receive  higher  wages.  The  pay  envelope  may  seem 
bigger.  But  the  comforts  received,  the  food,  the 
opportunities  for  living,  must  of  necessity  be  re- 
duced. 

THE    FARMER 

The  same  is  true  of  the  farmer.  He  cannot  com- 
bine. The  prices  he  receives  are  fixed  in  the  markets 
of  the  world.  They  are  fixed  by  food  exchanges 
like  the  wheat  pit  in  Chicago  and  Minneapolis,  by 
poultry  and  egg  exchanges,  and  by  the  packing 
monopoly.  They  are  fixed  by  buyers  and  commis- 
sion men  employed  by  these  agencies. 

The  farmer  not  only  produces  for  an  unknown 
market;  he  produces  for  an  unknown  price.     In  this 

[139] 


respect  he  differs  from  every  other  producer.  Even 
the  worker  has  more  certainty  as  to  the  wage  he  is 
to  receive.  The  farmer  cannot  negotiate  as  to 
prices.  He  has  but  one  market  and  that  is  con- 
trolled by  the  buyer.  The  price  of  wheat,  corn  and 
cattle  as  well  as  milk,  eggs,  poultry  and  truck  gar- 
den stuff  is  fixed  for  him.  The  farmer  has  no  ware- 
houses of  his  own  and  little  credit  with  which  to 
carry  his  produce  should  he  desire  to  do  so.  He 
must  sell  almost  immediately  after  harvest,  and  he 
must  sell  to  a  buyer  who  has  all  the  cards  in  his 
hands.  Each  year  the  farmers  of  the  West  com- 
plain that  they  sell  their  grain-fed  beeves  and  hogs 
for  less  than  it  costs  to  produce  them.  The  wheat 
growers  of  the  Northwest,  the  dairymen  and  truck 
gardeners  about  the  cities,  make  the  same  complaint. 
The  6,000,000  farmers  of  the  country  carry  a  great 
S'hare  of  these  overhead  costs,  and  the  profits,  com- 
missions and  salaries  of  the  exploiting  groups. 

THE    BURDE.N    ON    LABOR 

This  burden  of  overhead  is  all  borne  by  the  pro- 
ducing classes.  It  may  be  the  labor  of  the  mind  or 
the  labor  of  the  hand.  Labor  applied  to  the  land 
brings  forth  food  and  raw  materials.  Labor  ap- 
plied to  the  machine  brings  forth  goods.  Labor  ap- 
plied to  transportation  gives  a  place  value  to  wealth. 
Whatever  the  field  of  effort,  all  wealth  is  the  pro- 
duct of  labor.  And  the  tribute  is  paid  each  year  out 
of  the  current  wealth  produced.     It  cannot  be  other- 

[140] 


wise.     There  Is  no  other  source  from  which  It  can 
come. 

Labor  suports  itself.  It  largely  supports  the 
state  by  taxes  on  consumption ;  it  supports  the  land- 
lord; it  supports  the  exploiting,  the  professional  and 
the  parasitical  groups.  It  supports  the  cost  of  bank- 
ing, credit,  distribution,  exchange.  The  costs  of  ex- 
ploitation are  ultimately  paid  out  of  the  products  of 
labor.  As  the  exploiting  group  grows  in  economic 
power,  it  uses  its  power  to  increase  its  political 
power.  It  uses  the  state,  the  press,  the  agencies  of 
public  opinion.  Neither  Congress  nor  the  Depart- 
ment of  Justice  show  any  disposition  to  challenge  its 
exactions.  They  do  not  regulate  or  control  the  food 
gamblers,  the  fuel  monopolists,  the  speculators. 
Sugar  is  selling  at  three  times  its  pre-war  cost.  Coal, 
iron  and  steel,  clothes,  shoes,  hats,  have  doubled  and 
trebled  in  cost.  Eggs,  poultry,  meat  and  all  food 
products  have  passed  under  the  control  of  the  pack- 
ing syndicate,  which  charges  what  it  wills  unchal- 
lenged by  the  press  or  by  Congress.  Lumber  and 
building  supplies  have  become  prohibitive.  Prof- 
iteering without  limit  is  the  order  of  the  day.  The 
power  of  the  exploiting  group  is  so  unquestioned  that 
it  fears  neither  public  opinion  nor  political  action. 

The  parasitical  classes  have  also  increased  in 
number.  They  too  feel  that  they  have  a  vested 
right  to  live  as  parasites.  As  they  are  closely  iden- 
tified with  the  exploiting  groups,  they  are  protected 
from  molestation. 

[HI] 


Labor  and  the  rarmer  can  only  meet  these  condi- 
tions by  demands  for  higher  wages  and  higher  prices. 
But  this  does  not  protect  them.  It  merely  creates 
a  vicious  circle.  Increasing  wages  are  made  an  ex- 
cuse for  a  further  Increase  In  prices.  This  Increases 
the  cost  of  living  which  In  turn  necessitates  further 
wage  demands. 

This  Is  the  Industrial  cycle  that  privilege  has  set 
going.  Even  should  labor  permit  Its  standard  of 
living  to  be  reduced,  even  should  the  farmer  permit 
his  prices  to  be  cut  this  would  bring  little  relief  to 
the  consumer.  For  competition  Is  gone.  The  ex- 
ploiting groups  charge  what  the  traffic  will  bear. 
They  apply  the  rule  of  monopoly,  which  Is  to  take 
as  much  and  give  as  little  as  possible. 

PROFITS  ARE  CREATED  OR  PROTECTED  BY  LAW 

In  this  process  of  wealth  transfer  from  one  class 
to  another  privilege  Is  not  violating  the  law.  Privi- 
lege Is  protected  by  the  law.  It  is  pursuing  the  ap- 
proved principles  of  business.  There  is  no  legal 
reason  why  business  should  take  less  than  It  can  get. 
There  Is  no  reason  why  the  trust  should  charge  less 
than  it  can  collect.  There  is  no  reason  In  law  for 
expecting  men  who  control  the  economic  life  of 
America  to  take  a  penny  less  than  they  can  make, 
to  refrain  from  exploitation,  to  pay  higher  wages 
than  they  have  to,  to  pay  more  taxes  than  they  are 
compelled  to  pay,  or  to  sell  any  more  or  any  bet- 

[142] 


ter  goods  than  they  are  forced  to  sell  by  their  cus- 
tomers. 

Exploitation  is  the  rule  of  our  economic  life.  It 
is  approved  by  commercial  opinion.  It  has  the  sanc- 
tion of  our  law  makers  and  of  our  courts.  It  is 
the  logical  result  of  the  rise  of  privilege  to  power. 
Exploitation  is  the  rule  of  modern  society.  It 
should  be  frankly  faced.  For  no  improvement  is 
possible  so  long  as  we  deceive  ourselves  as  to  the 
facts. 

Exploitation  is  born  of  the  political  state.  The 
taxes  we  bear,  the  ground  rents,  the  profits  of  mo- 
nopoly, the  subsidies  to  the  railroads,  the  privileges 
of  the  banks,  the  patent  rights  that  shield  monopoly, 
the  tariff  and  the  indirect  taxes  on  consumption,  the 
control  of  the  agencies  of  justice  and  of  administra- 
tion, all  these  are  privileges  created  and  protected 
by  the  state.  The  overhead  costs  of  society  are 
law  made.  They  are  law  protected.  They  are 
sanctioned  by  the  state.  Were  it  not  for  the  privi- 
leges created  by  the  state  wealth  would  be  distributed 
according  to  labor  cost,  speculative  monopoly  val- 
ues would  crumble,  profits  would  be  controlled  by 
competition  while  the  producing  as  opposed  to  the 
exploiting  classes  would  rise  to  power.  Wealth  cre- 
ated by  law  is  at  war  with  wealth  created  by  labor. 


[143] 


CHAPTER  XIV 

FEUDALISM 

Feudalism  is  commonly  described  as  a  system  of 
land  tenure  by  an  hierarchy  of  persons,  each  hold- 
ing from  some  one  above  him,  and  all  holding  ulti- 
mately from  the  king.  In  this  hierarchy  the  lord 
provided  a  certain  number  of  soldiers  and  supplies  to 
the  king;  the  vassal  supplied  a  smaller  quota  of  men 
and  performed  personal  services  to  the  lord,  while 
the  lowest  grade  of  vassals  paid  rent  in  the  form  of 
produce  and  rendered  personal  services  on  the  farms, 
in  the  household  or  on  the  field  of  battle.  Every 
man  held  his  land  from  some  one  above  him;  every 
man  worked  or  rendered  services  to  his  superior. 
Feudalism  was  a  system  of  land  tenure  and  a  politi- 
cal organization  based  upon  land  tenure.  It  was 
the  prevailing  European  society  for  ten  centuries. 

THE    ECONOMIC    FRAMEWORK    OF    FEUDALISM 

This  hierarchical  tenure  of  land  was  the  economic 
framework  of  society.  Feudalism  was  also  a  social 
system  in  which  man's  relation  to  land  fixed  and  de- 
termined everything  else.     Society  was   organized 

[144] 


about  economic  relations.  The  workers  and  the 
peasants  paid  all  the  taxes,  all  the  rent,  and  per- 
formed all  the  productive  work  of  society.  The 
seigneur  owned  the  wine-presses  and  the  mills  to 
which  the  workers  were  compelled  to  bring  their 
produce.  He  also  took  tolls  on  the  highways.  By 
this  means  the  overlord  exacted  tribute  from  the 
workers.  Taxes  were  collected  from  the  things  the 
people  consumed,  or  were  paid  by  the  peasants  and 
the  serfs.  The  privileged  classes  paid  no  taxes  at 
all. 

Labor  was  divided  into  groups.  Men  could  not 
move  from  one  group  to  another.  They  dared  not 
organize  as  workers.  A  trade  union  was  a  criminal 
conspiracy.  Men  might  not  organize  for  higher 
wages  or  to  improve  their  status.  There  were  laws 
against  such  combinations. 

A    PRIVILEGED   SOCIETY 

Education  was  privileged.  It  was  confined  to  the 
clergy  and  the  leisure  classes.  The  professions  of 
law,  drama  and  literature  were  parasitic.  They 
lived  by  the  favor  of  patrons.  Professional  men 
thought  and  said  what  the  ruling  classes  wanted  them 
to  say.  There  was  no  freedom  of  discussion  and 
little  freedom  of  thought.  The  mind  of  society  was 
fixed  by  the  rulers  and  owners,  who  compelled  the 
philosophers,  the  lawyers,  the  teachers  and  the 
writers  to  support  the  economic  system  and  to  say 
what  the  ruling  classes  desired.     The  psychology  of 

[145] 


society  was  a  caste  psychology  shaped  and  molded 
to  maintain  the  feudal  class. 

The  leisure  classes  did  no  work.  They  owned 
and  they  ruled.  They  were  privileged  in  every  way. 
They  treated  the  classes  below  them  as  little  better 
than  slaves.  They,  the  lower  classes,  had  no  rights 
in  the  courts.  For  the  seigneurs  were  the  courts  as 
they  were  the  law  makers. 

Feudalism  was  more  than  an  economic  hierarchy. 
It  was  a  stratified  society  which  permeated  into  all 
relations  of  life.  There  was  little  for  men  to  strive 
for.  It  was  dangerous  to  save  because  anything  one 
saved  was  seized  for  taxes  or  rent.  The  mind  of 
the  people  was  controlled.  So  was  invention  and 
initiative.  Ultimately  people  almost  ceased  pro- 
ducing. Poverty  was  universal.  The  control  of 
society  by  a  parasitic,  economic  group  led  to  the 
paralysis  of  energy  and  effort. 

THE    FRENCH    REVOLUTION 

Finally  the  French  revolution  came.  It  was  both 
political  and  economic.  It  dethroned  the  king  and 
the  privileged  classes.  It  divided  the  land  among 
the  peasants.  It  destroyed  the  feudal  system  and 
the  caste  organization  of  society.  The  peasants  be- 
came owners  instead  of  serfs.  Economic  freedom 
went  hand  in  hand  with  political  freedom.  The 
mind,  the  talent  and  initiative  of  the  people  was  re- 
leased and  a  new  society  was  born  which,  during  the 
last  hundred  years,  has  been  increasing  the  produc- 

[146] 


tion  of  wealth,  the  efficiency  of  labor  and  the  eco- 
nomic and  Intellectual  well-being  of  mankind. 

This  was  the  feudal  system  of  old  Europe,  which 
we  assume  came  to  an  end  with  the  French  Revolu- 
tion. Yet  an  analysis  of  conditions  In  America 
shows  that  we  are  fast  taking  on  feudal  forms.  In 
fact,  almost  all  of  the  elements  of  feudalism  are 
here.  The  underlying  forces  of  the  new  feudalism 
as  of  the  old  are  economic.  They  control  politics. 
They  shape  the  Intellectual  and  social  relations  In 
which  we  live.  The  forces  at  work  are  perfecting 
a  system  that  Is  essentially  the  same  as  that  of  the 
old  regime.  It  Is  a  system  In  which  the  privileged 
groups  are  far  more  powerful  than  they  were  in 
olden  times. 

PRESENT   DAY    SOCIETY 

First,  the  structure  of  present  day  society  is 
feudal.  Land,  credit,  transportation,  fuel,  Iron  ore, 
oil,  copper,  lumber,  and  the  control  of  foods  Is  In 
the  hands  of  a  few  men  who  determine  how  and 
when  and  on  what  terms  they  may  be  had.  Those 
who  control  these  economic  processes  are  closely  In- 
terlaced by  political  and  economic  Interests.  They 
operate  out  of  Wall  Street  as  the  seigneurs  operated 
from  Versailles.  Through  concentrated  control  of 
Industry,  millions  of  workers  and  a  hundred  mil- 
lion people  are  subject  to  the  decree  of  these 
men. 

The  land  Is  passing  under  feudal  control.     Over 

[147] 


200,000,000  acres,  or  one-fourth  of  our  total  area, 
is  in  the  hands  of  less  than  50,000  persons.  Many 
estates  in  the  West  are  as  large  as  those  of  feudal 
Europe.  The  agricultural  class  is  rapidly  becom- 
ing a  tenant  class;  we  are  fast  developing  a  compet- 
itive tenancy  that  has  no  security  of  tenure,  that 
may  be  evicted  at  will,  and  that  pays  increasing  rent 
each  year  to  the  land-owning  group.  A  study  of  the 
census  returns  shows  the  rapidity  of  the  growth  of 
tenancy,  and  the  investigations  that  have  been  made 
in  the  West,  especially  in  Texas,  Oklahoma  and 
Iowa,  disclose  conditions  not  very  different  from 
conditions  in  Ireland  prior  to  the  passage  of  the 
Land  Purchase  acts. 

Agricultural  rents  are  rising.  They  rise  as  the 
result  of  competition  for  land  and  the  withholding 
of  land  from  use.  Not  to  exceed  one-half  of  the 
enclosed  land  is  tilled,  while  hundreds  of  millions  of 
acres  are  held  out  of  cultivation  altogether.  Our 
urban  population  is  increasing  while  the  rural  popu- 
lation is  decreasing.  The  city  population  demands 
more  food.  This  in  turn  increases  the  value  of 
agricultural  land  and  the  price  which  can  be  de- 
manded for  its  use. 

In  so  far  as  land  is  concerned  America  exhibits 
the  essential  conditions  of  feudal  times.  We  have 
land  monopoly  and  large  holdings,  we  have  tenancy 
and  increasing  rents.  These  are  the  essentials  of  the 
servile  system  of  old  Europe. 

The  fuel,  the  oil,  the  timber,  the  iron  ore,  copper 
[148] 


and  resources  of  the  earth  are  owned  by  a  relatively 
small  group  of  men  as  they  were  in  earlier  times. 

INDUSTRIAL    FEUDALISM 

Transportation  is  in  private  hands.  It  is  owned 
by  the  same  group  that  owns  the  basic  Industries 
and  the  raw  materials.  The  rule  of  railroading  is  to 
charge  what  the  traffic  will  bear;  to  take  as  much  as 
possible  from  the  consuming  classes.  Railroads  are 
not  primarily  interested  in  upbuilding  the  country; 
they  are  interested  in  speculation,  stock-jobbing  and 
the  suppression  of  competition.  They  discourage 
competitive  production.  They,  along  with  landlord- 
ism and  the  withholding  of  resources  from  use,  are 
sabotaging  the  nation.  They  smother  the  inventive, 
and  productive  capacity  of  the  people. 

To  this  must  be  added  the  private  control  of  bank- 
ing and  credit.  It  too  is  closely  controlled  by  a 
banking  syndicate,  whose  power  radiates  out  from 
New  York  to  the  smallest  town  In  the  land.  Our 
credit  resources  are  concentrated.  They  are  not 
used  primarily  to  aid  the  farmer,  to  stimulate  com- 
petitive Industry.  They  are  used  rather  to  pro- 
mote and  protect  monopoly  and  to  enable  those  who 
control  our  credit  resources  to  speculate  and  gamble 
with  the  lives  of  the  people.  More  recently,  these 
resources  are  used  for  overseas  exploitation  and  the 
development  of  other  countries  rather*  than  our 
own.  Imperialism  has  come  upon  us.  And  im- 
perialism is  the  last  stage  of  capitalistic  feudalisni, 

[149] 


These  elemental  agencies  —  land,  raw  materials, 
fuel,  transportation,  and  banking,  control  every- 
thing else.  They  determine  our  economic  life. 
They  are  the  foundations  of  society.  They  shape 
our  life  as  did  the  land  in  feudal  times. 

POLITICAL   FEUDALISM 

Springing  from  economic  feudalism  we  have  a 
political  feudalism  differing  but  little  from  that  of 
earlier  ages.  It  is  not  hereditary,  it  is  true.  It  is 
Industrial  rather  than  landed.  But  political  power 
is  based  upon  economic  power.  Our  cities,  states 
and  the  nation  mirror  the  wants  of  the  economic 
group  that  owns  the  basic  industries  of  the  country. 
Our  political  representatives  are  lawyers  or  the 
owners  of  banks,  railroads,  mines  and  the  exploit- 
ing groups.  Within  the  last  fifty  years  the  texture 
of  politics  has  changed  until  it  mirrors  the  interests 
of  the  group  that  owns. 

Here  we  have  the  second  element  of  feudalism. 
Whereas  in  feudal  times  political  power  was  lodged 
with  the  king  and  the  landed  classes,  to-day  it  is 
lodged  with  a  similar  economic  group  which  seeks 
power  and  uses  power  just  as  did  the  grand  seigneur 
in  the  past. 

FEUDALIZED    CULTURE 

The  press  is  an  agency  of  the  feudal  class.  It 
is  owned  by  bankers,  mine-owners,  railroads,  fran- 
chise and  public  utility  groups.     It  is  their  mouth- 

[150] 


piece.  It  is  this  and  little  more.  The  same  is  true 
of  our  magazines.  Any  one  who  has  watched  the 
press  in  recent  years  must  have  noted  the  extent  to 
which  honest  reporting,  honest  editorial  writing  or 
the  free  discussion  of  public  questions  has  tended  to 
disappear.  The  press  has  become  a  proprietary 
agency.  Our  opinions  are  made  for  us  by  those  who 
own  the  nation  and  who  rule  it  as  well. 

Education  has  taken  on  the  color  of  the  ruling 
class.  This  is  true  of  our  privately  endowed  colleges 
and  universities.  Teachers  dare  not  think  freely 
or  speak  freely  or  permit  others  to  do  so.  Univer- 
sities and  schools  drop  from  the  faculties  men  of 
independent  thought.  They  frighten  men  of  initia- 
tive. This  is  not  confined  to  political  economy.  It 
is  true  of  cultural  questions  as  well.  Those  who 
should  lead  the  thought  of  America  are  denied  the 
right  to  do  so.  They  are  kept  in  a  condition  of  ter- 
rorism by  trustees,  who  in  turn  represent  the  group 
from  which  donations  and  foundations  are  to  be  ex- 
pected. 

Our  state  universities  are  but  little  better. 
They  mirror  the  state  legislature.  And  in  recent 
years  our  state  universities  have  become  almost  as 
reactionary  minded  and  intolerant  of  free  opinion 
as  have  the  privately  endowed  universities  of  the 
East. 

The  church  reflects  the  same  condition.  The 
ministry  is  not  free.  It  too  is  the  servitor  of  the 
pew-renters ;  of  the  wealthy  men  in  the  congregation  \ 


of  those  who  support  and  maintain  the  church. 
The  church  has  become  largely  a  propertied  insti- 
tution. And  It  uses  Its  power  to  preserve  the  status 
quo. 

CASTE 

Caste  has  appeared  as  it  did  In  earlier  times.  The 
social  structure  is  taking  on  feudal  forms.  The  ex- 
ploiting groups  have  become  the  ascendant  groups. 
The  exploiting  professions  and  parasitic  employ- 
ments have  become  the  desirable  professions.  No 
one  desires  to  be  a  worker  or  a  producer  If  he  can 
avoid  it.  Every  one  seeks  to  rise  into  the  parasitical 
classes.  And  to  rise  above  one's  station  means  to 
cease  to  be  a  producer. 

The  overhead  burdens  of  society  are  being  shifted 
by  the  exploiting  groups  to  labor,  as  was  done  in 
feudal  times.  They  then  consisted  of  rent  and  taxes 
and  services.  They  consist  of  rent  and  taxes  and 
profit  to-day.  The  overhead  charges  are  Increas- 
ing. The  owning  classes  seek  to  put  taxes  on  to  the 
things  the  people  buy  and  use.  They  protest  against 
real  estate  taxes,  income  taxes  and  inheritance  taxes. 
For  these  taxes  bear  upon  wealth.  The  constant 
effort  Is  to  shift  all  taxation  upon  the  consumer. 
Just  as  under  the  feudal  system  all  taxes  were  paid 
by  the  serf,  just  as  countless  exactions  were  Imposed 
on  him  in  his  industrial  activities,  so  to-day  the  pro- 
ducing groups,  chiefly  farmers  and  workers,  are 
being  exploited  by  taxes,  ground  rents  and  profits 


until  the  share  of  the  producer  is  being  ground  down 
to  a  living  wage.  This  is  true  of  the  farmer,  of 
the  professional  man,  of  the  person  of  small  means 
and  of  a  great  part  of  the  working  class  as  well. 

SUPPRESSING   LABOR 

As  a  final  step  in  this  evolution  new  statutes  arc 
being  proposed  and  vigorously  pressed,  making  it  a 
criminal  offense  for  labor  to  strike  to  maintain  or  to 
better  its  condition.  The  courts  are  themselves 
making  laws  for  this  purpose  under  equity  powers 
of  injunction.  The  Statutes  of  Laborers  passed  in 
Great  Britain  in  the  twelfth  and  thirteenth  centuries 
were  designed  for  the  same  purpose.  Labor  is  the 
only  group  left  that  challenges  exploitation.  And 
the  present  intolerance  of  unionism,  the  legislative 
efforts  to  check  its  power,  are  part  of  a  class  psy- 
chology that  is  the  final  step  in  the  evolution  towards 
industrial  feudalism.  For  with  organized  labor 
crushed,  there  is  no  organized  force  left  to  protest. 

Under  the  class  psychology  of  feudalism,  labor 
must  be  forced  to  accept  its  status  and  be  content. 
It  must  be  content  to  accept  a  "  fair  wage  "  fixed  by 
the  employer  or  by  a  commission  provided  for  the 
purpose  by  the  employer.  It  must  submit  to  arbitra- 
tion in  which  labor  is  always  at  a  disadvantage. 
These  means  failing,  the  state  constabulary,  the  state 
police,  the  militia  and  machine  guns  are  to  be  called 
out  to  break  up  protests. 

[153] 


CONTROLLING    CONSUMPTION 

The  feudal  classes  also  control  the  necessities  of 
life  which  the  worker  must  have  to  live,  much  as 
they  did  in  earlier  times  when  they  controlled  the 
wine  presses,  and  the  mills  to  which  the  serf  had  to 
take  his  produce.  They  fix  the  prices  of  food,  of 
clothes,  of  fuel,  of  transportation,  of  practically 
everything  the  worker  buys.  They  control  the  edu- 
cation he  receives,  the  recreation  he  enjoys  and  the 
literature  he  reads.  With  the  power  to  fix  wages 
and  the  power  to  fix  prices  lodged  in  the  same  hands, 
with  the  control  of  political  power  and  with  it  the 
right  to  levy  taxes  in  the  hands  of  the  same  class 
that  determines  wages  and  prices,  we  see  how  com- 
pletely America  has  passed  from  a  country  in  which 
freedom  and  liberty  was  the  dominant  note,  into  a 
country  with  all  the  essentials  of  feudalism  save  that 
of  hereditary  caste.  Even  hereditary  caste  is  here, 
for  caste  is  an  economic,  not  a  hereditary  thing. 
The  class  which  rules  has  identified  itself  with  the 
ownership  of  the  land,  and  it  has  been  such  identifica- 
tion, whether  in  old  France,  or  in  modern  Prussia, 
'  Russia  or  Great  Britain,  that  has  given  permanence 
and  hereditary  power  to  the  aristocracies  of  these 
countries.  Land  has  always  been  the  basis  on  which 
aristocracies  have  reared  themselves.  It  is  only  the 
landed  aristocracies  that  have  been  permanent. 
And  the  aristocracy  of  America  owns  the  mines,  the 
resources,  the  land  of  our  cities,  the  transportation 

[154] 


agencies  and  the  public  utility  corporations,  all  of 
which  monopolies  are  based  upon  the  ownership  of 
the  land. 

Freedom  of  discussion  of  political  and  economic 
questions  is  being  censored.  Congress,  our  state 
legislatures,  and  our  municipal  authorities  have  ar- 
rested men  by  the  thousands  for  offenses  which  were 
freely  recognized  rights  of  a  few  years  ago.  The 
alleged  "  red  "  conspiracies  passed  unnoticed  for 
forty  years.  They  were  part  of  the  free,  unchal- 
lenged discussion  of  the  people.  No  one  suggested 
the  suppression  of  such  expression  or  the  interference 
by  the  Government  with  the  constitutional  rights  of 
all  classes  to  discuss  freely  the  Constitution  and  the 
laws  of  the  land. 

Force  is  the  final  weapon  of  feudalism;  and  force 
backed  by  Congress,  by  the  police  and  by  the  Army, 
is  being  organized  to  crush  criticism  or  offensive 
political  action. 

These  are  the  elements  of  feudalism;  a  feudalism 
we  thought  was  forever  dead.  In  reality,  we  are 
living  in  a  feudal  state.  Why  disguise  it  or  refuse 
to  accept  it?  Economic  liberty  is  gone  for  the  ma- 
jority of  the  people.  For  the  wages  system  is  not 
liberty,  however  free  the  individual  worker  may  be 
to  change  his  job.  Political  liberty  has  not  saved 
our  institutions  or  been  able  to  control  economic 
privilege. 

Our  political  agencies  contribute  to  a  feudalized 
society.     Neither  labor  nor  the  unorganized  people 

[155] 


can  function  through  the  maze  of  primaries,  elec- 
tions, and  a  tangled  governmental  organization,  all 
aligned  with  privilege  and  each  in  turn  a  brake  on 
progress.  America  is  far  more  effectively  chained 
to  privilege  than  was  old  France  or  modern  England. 
Our  political  and  social  philosophy  is  dedicated  to 
the  maintenance  of  the  status  quo. 

Preferment  is  controlled.  Free  discussion  is 
checked.  Individuality  is  stifled.  Thought  is  strati- 
fied. This  is  the  costliest  price  of  all.  For  free- 
dom of  the  mind  is  fundamental  to  a  progressive 
civilization.  In  this  too,  we  have  a  reproduction  of 
the  psychology  of  the  old  regime;  of  the  psychology 
that  deadens  and  destroys  the  culture  of  a  people. 
It  is  this  that  is  responsible  for  the  slackening  of 
production,  it  is  this  that  is  responsible  for  sabotage. 
It  is  leading  the  worker  to  limit  his  output  and  de- 
mand as  much  as  possible  for  his  product.  For 
labor  is  treated  as  a  commodity.  And  the  rule  of 
the  commodity  market  is  to  give  as  little  as  possible 
and  to  get  as  much  as  possible.  Feudalism  is  reach- 
ing its  logical  consequence  in  a  stratification  of  all 
processes.      In  this  it  is  true  to  the  past. 


[156] 


CHAPTER  XV 

CIVILIZATION 

The  cause  of  the  decay  of  states  has  been  a  favorite 
study  of  historians.  They  have  studied  the  evolu- 
tion of  peoples  on  the  Nile  and  in  the  valleys  of 
Mesopotamia,  in  ancient  Greece  and  in  Rome;  they 
have  described  the  glories  and  decadence  of  Portugal 
and  of  Spain,  of  the  medieval  Italian  cities  and  of 
pre-revolutionary  France.  They  have  observed  the 
rise  of  peoples  to  greatness,  and  their  subsequent 
decay.  But  they  have  offered  no  adequate  explana- 
tion for  this  phenomenon.  They  have  seen  no 
axioms  of  social  evolution.  Society  has  not  been 
studied  as  have  the  lower  orders  of  life.  We  are 
more  nearly  in  agreement  as  to  pre-historic  types, 
as  to  the  evolution  of  the  ape,  than  we  are  as  to 
the  evolution  of  man  in  his  organized  social  rela- 
tions. 

Yet  an  understanding  of  the  rise  and  fall  of  states 
should  be  the  most  important  concern  of  research 
foundations  and  universities.  The  colleges  and  the 
schools  should  study  the  forces  that  make  for  human 
progress  and  the  conditions  that  contribute  to  decay. 

[157] 


There  Is  certainly  evidence  enough  In  our  libraries 
to  disclose  what  has  happened  to  other  nations  as 
powerful  as  our  own.  They  disclose  certain  com- 
mon forces  that  have  operated  In  all  ages  and  In 
the  same  way.  There  Is  evidence  enough  to  enable 
the  scientist  to  establish  a  law  of  civilization  and  de- 
cay. History  discloses  that  what  is  taking  place  in 
Great  Britain,  In  France,  In  Italy,  even  In  America 
to-day,  took  place  in  earlier  states  whose  civiliza- 
tion In  many  respects  paralleled  our  own.  And 
there  is  great  similarity  In  conditions.  The  modern 
state  It  Is  true  may  be  a  long  way  from  decadence. 
It  is  probably  a  long  way  from  collapse.  There 
are  no  barbarian  hordes  to  overrun  us  as  there 
were  in  earlier  times.  But  decay  is  here  as  It  was 
In  earlier  societies,  apparently  as  impregnable  as  our 
own. 

ANCIENT    ROME 

Rome  is  the  historic  example  of  the  rise  of  a  na- 
tion to  a  high  civilization  and  Its  subsequent  subsid- 
ence to  decay.  It  was  not  outside  conquest,  how- 
ever, that  destroyed  the  Roman  Empire.  The  de- 
cadence of  Rome  began  In  the  Republic,  not  during 
the  later  Empire.  It  began  with  the  rise  of  the 
patrician  class  to  power  and  the  laws  enacted  by 
this  class  to  control  the  economic  life  of  the  state. 
These  laws  resulted  in  such  a  profound  impairment 
of  the  people  that  the  empire  Itself  fell  Into  decay. 
Under  the  class  rule  of  an  economic  group  the  free 

[158] 


Roman  citizen  became  little  more  than  a  serf;  he 
became  in  time  a  dependent  living  on  doles  and  kept 
in  subjection  by  the  laws  and  by  force  applied  by 
the  ruling  class. 

Down  to  the  Carthaginian  Wars,  Roman  life  was 
simple.  A  great  part  of  the  land  of  Italy  was  di- 
vided into  small  holdings  cultivated  by  home- 
owning  farmers.  They  were  the  strength  of  the 
state.  They  formed  a  citizen  army.  They  rarely 
knew  defeat.  The  political  institutions  reflected  the 
will  of  the  free  citizen.  The  patrician  class  was 
held  in  check  by  the  democratic  institutions  that  pre- 
vailed. 

The  prolonged  wars  with  Carthage  summoned  the 
man  power  of  the  nation  to  arms.  It  stripped  the 
fields  of  workers.  During  their  absence  in  military 
service,  the  patrician  class  in  the  Senate  strength- 
ened its  control  of  the  state.  It  enacted  laws  for 
its  personal  enrichment.  The  senators  enclosed  the 
latifiindia  or  common  lands  of  Italy,  which  belonged 
to  all  the  people.  They  had  been  taken  in  war  and 
were  common  property.  The  members  of  the  aris- 
tocracy divided  these  lands  into  great  estates  and 
bestowed  them  on  themselves  at  an  insignificant 
rental.  Not  content  with  this  they  took  the  farms 
of  the  soldiers.  This  was  done  by  usury  and  fore- 
closure. Quite  frequently  it  was  done  by  force.  At 
the  end  of  the  war  the  soldier  found  his  farm  gone. 
It  was  encumbered  with  mortgage  or  grown  up  with 
weeds.     The  soldier  was  without  capital  to  begin 

[159] 


life  anew.  The  latifundia  or  public  domain  was 
gone  and  could  not  be  distributed.  The  soldier  had 
to  go  to  the  money  lenders  for  credit.  The  money 
lenders  came  from  the  patrician  class  which  had  al- 
ready seized  his  lands.  The  free  yeomen  of  Italy 
lost  their  homes  in  the  process.  They  were  placed 
in  slavery  under  the  debtor  laws,  or  driven  to  the 
towns  where  they  lived  by  doles  and  were  kept  con- 
tented by  games  and  displays. 

The  patrician  land-owners  brought  gangs  of  slaves 
from  conquered  lands  to  cultivate  their  great  estates. 
With  these,  the  free  farmer  could  not  compete. 
Husbandry  became  a  servile  pursuit.  This  con- 
tributed to  the  destruction  of  the  free  Roman  citi- 
zen. The  freeman  lost  his  virility  when  he  lost  his 
land.  He  lost  his  political  power  as  well.  In  time 
the  citizen  soldiery  disappeared  and  hirelings  took 
its  place. ^ 

A  great  part  of  the  food  came  from  overseas. 
Tribute  from  the  Near  East  and  Africa  supported 
the  state.  The  senatorial  class,  which  was  also  the 
land-owning  and  the  money-lending  class,  gradually 
acquired  all  political  power.  It  acquired  all 
economic  power  as  well.  It  wrung  high  rents  from 
the  poor.  It  exacted  usury  from  the  borrower.  It 
exacted  colossal  profits  from  all  the  necessities  of 

1  This  is  what  is  happening  to-day  in  the  West  and  Southwest 
where  Mexicans  are  being  imported  to  cultivate  the  fields  and  to 
work  the  mines.  It  was  a  similar  policy  that  controlled  our  immi- 
gration laws  and  the  importation  of  cheap  labor  for  the  mines  and 
the  steel  mills   during  the   quarter   of   a  century  before  the  war. 

[i6o] 


life.  The  state  gradually  and  insensibly  decayed. 
The  freeman,  stripped  of  economic  power,  lost 
political  interest.  He  was  unable  to  resist.  Rome 
ultimately  fell  before  the  more  virile  bands  from 
the  North. 

Rome  was  destroyed  from  within.  She  was  de- 
stroyed as  a  result  of  the  control  of  her  life  by  a 
privileged  group  that  reduced  the  free  population 
to  poverty  with  no  stake,  no  participation,  and  no 
economic  interest  in  the  state.  Rent,  profits,  usury 
and  taxes  destroyed  the  Roman  Empire. 

GREAT    BRITAIN 

Modern  England  is  a  repetition  of  ancient  Rome. 
The  history  of  these  two  empires,  their  evolution,  the 
forces  making  for  decay,  are  almost  identical. 

Two  centuries  ago,  a  great  part  of  the  land  of 
England  was  owned  in  common  as  it  was  in  Rome. 
This  had  been  so  from  early  times.  The  yeoman 
farmers  were  the  strength  of  the  state.  They 
fought  England's  wars;  they  gradually  stripped  the 
king  of  power.  But  the  yeoman  farmers  were  help- 
less before  the  patrician  class,  which  controlled  the 
House  of  Lords  as  the  patricians  controlled  the 
Roman  Senate.  The  House  of  Lords  was  exclu- 
sively a  landed  body.  No  others  were  admitted. 
It  was  also  an  hereditary  body.  Even  to-day,  the 
House  of  Lords  is  a  house  of  great  landlords. 
Other  groups  are  admitted  only  on  sufferance. 

During  the  eighteenth  century  and  the  Napoleonic 
[i6i] 


Wars,  Parliament  seized  the  common  lands  of  the 
people  by  enclosure  acts,  just  as  did  the  Senate  of 
Rome  during  the  Carthaginian  Wars.  Members 
of  Parliament  added  the  common  lands  to  their 
private  estates.  They  did  this  by  law.  And  as 
most  of  the  members  of  Parliament  were  landlords, 
they  legislated  In  one  another's  interest.  They 
legalized  one  another's  enclosure  acts.  Over  a  third 
of  the  land  of  England  passed  from  common  owner- 
ship to  private  ownership  In  this  way. 

Then  the  landlords  drove  off  the  cattle  and  the 
sheep  of  the  farmer.  They  denied  them  the  right 
of  cultivation,  of  pasturage,  of  fuel  and  of  fishery. 
They  converted  millions  of  acres  Into  hunting  pre- 
serves, Into  sheep  pastures.  Into  pleasure  resorts. 
The  Scotch  immigration  to  America  was  the  result 
of  the  enclosure  acts  of  the  eighteenth  century. 

LAND    MONOPOLY 

The  land  of  England  Is  to-day  owned  by  a  hand- 
ful of  people.  Members  of  the  House  of  Lords 
alone  own  fifteen  million  acres.  Individual  estates 
often  exceed  a  million  acres.  And  the  men  who 
own  the  land  of  England  still  control  the  House  of 
Lords.  They  control  the  House  of  Commons  as 
well.  The  Conservative  and  the  Liberal  parties  are 
largely  agencies  for  the  protection  of  the  privileges 
of  the  landowning  class. 

Land  monopoly  Is  universal  in  Great  Britain.  Ac- 
[162] 


cording  to  the  Doomsday  Book  of  1874,  there  are 
only  319,550  persons  who  have  any  interest  in  the 
land  at  all.  One-fourth  of  the  total  acreage  is  held 
by  1200  persons  and  another  fourth  by  6200  per- 
sons. Individual  lords  own  the  land  underlying 
great  cities.  Nine  men  and  estates  own  almost  all 
the  land  covered  by  the  metropolitan  area  of  Lon- 
don. They  collect  ground  rent  from  all  the  peo- 
ple, from  all  the  business  men,  manufacturers  and 
occupiers.  They  own  the  coal  mines.  They  own 
houses  and  tenements.  They  own  the  basis  of  all 
life.     Great  Britain  is  a  landlords'  country. 

A  great  part  of  the  land  is  held  idle.  This  Is 
possible  because  the  privileged  classes  which  own  the 
land  have  exempted  it  from  local  taxation.  For 
land  as  land  Is  not  taxed  in  Great  Britain.  It  is 
assessed  as  It  was  two  hundred  years  ago  when  Great 
Britain  was  almost  exclusively  agricultural.  The 
valuation  made  in  1692  has  never  been  changed. 
Parliament  will  not  permit  it  to  be  changed.  The 
Lloyd  George  budget  of  1909  was  an  empty  vic- 
tory. The  valuation  provided  by  that  Act  has  never 
been  completed. 

This  makes  it  possible  to  use  land  for  hunting, 
for  pasturage,  for  speculation.  Even  if  the  estate 
is  In  the  heart  of  London  it  can  be  kept  out  of  use 
at  little  cost  to  the  owner.  Building  suburbs  can 
be  used  as  private  preserves.  By  these  means  forty- 
three  million  people  pay  rent  to  a  handful  of  noble 

[163] 


landowners  who  not  only  own  the  land,  they  control 
the  politics  of  the  country  as  well.^ 

CASTE 

Caste    is    determined   by   land    ownership.     The 
Church   is   a   landed   institution.     For   the    Church 

^  It  is  inconceivable  to  Americans  that  the  land  of  Great  Britain 
is  taxed  to-day  as  it  was  in  1692.  There  has  never  been  a  re- 
appraisal. The  land  underlying  cities  has  never  been  revalued. 
It  pays  the  same  real  estate  taxes  that  it  did  when  the  land  was 
used  for  farming.  Despite  the  fact  that  four  peoples  out  of  five 
now  live  in  cities,  despite  the  fact  that  the  city  land  is  worth  bil- 
lions of  pounds,  despite  the  fact  that  coal  mines  have  been  dis- 
covered and  metropolitan  cities  have  been  built,  the  landowner 
has  not  had  his  land  revalued  for  over  two  centuries.  It  is  as 
though  the  land  of  Manhattan  island  were  taxed  at  the  twenty- 
four  dollars  originally  paid  to  the  Indians  instead  of  at  $5,000,- 
000,000  as  it  is  to-day.  Moreover  when  there  is  no  tenant  in  a 
house,  a  factory,  or  a  shop,  if  there  is  no  lessee  of  a  coal  mine,  or 
no  farmer  on  the  land,  if  there  is  no  tenant  to  which  the  tax  col- 
lector can  go  real  estate  is  exempt  from  taxation  altogether.  For 
under  the  laws  of  Great  Britain  local  taxes,  called  rates,  are 
paid  by  the  tenant.  They  are  not  paid  by  the  owner.  He  knows 
nothing  about  them.  He  is  free  to  leave  his  estates  in  the  heart 
of  a  city  go  to  weeds,  his  mines  to  lie  idle,  his  estates  to  be  used 
for  hunting  and  idle  pleasures.  That  is  why  the  land  of  England 
is  still  owned  by  a  handful  of  men  who  have  grown  to  great 
wealth  by  the  needs  of  43,000,000  people,  who  are  only  permitted 
to  use  a  small  part  of  the  land  and  who  pay  high  rents  and  all 
of  the  taxes  as  well.  In  many  towns  the  local  taxes  equal  one-half 
of  the  total  rent  paid.  Both  are  paid  by  the  tenant.  This  is  the 
real  explanation  of  the  decay  of  farming  in  England,  this  is  the 
explanation  of  the  congestion  of  her  cities,  this  is  the  underly- 
ing cause  of  the  poverty  of  the  people.  The  land  of  Great  Britain, 
conservatively  valued  at  $25,000,000,000,  pays  less  in  local  taxes 
than  does  the  land  in  a  village  in  this  country  of  10,000  people. 
This  was  the  issue  of  the  Budget  fight  of  1909.    In  this  fight  Lloyd 

[164] 


too  owns  land;  it  lives  by  tithes.  The  clergy  is 
recruited  from  the  landed  gentry.  Livings  are  doled 
out  to  the  younger  sons  of  the  aristocracy.  Religion 
is  part  of  a  landed  caste. 

The  law  is  profession  of  the  landed  nobility.  The 
barrister  is  often  a  younger  son.  He  is  always  de- 
pendent on  the  landed  and  commercial  classes  for 
his  briefs.  He  too  forms  part  of  the  parasitical 
group  that  serves  the  aristocracy  and  protects  its 
privileges  in  the  courts,  in  Parliament  and  in  the 
press. 

Education  is  a  privileged  thing.  Oxford  and 
Cambridge  are  colleges  for  gentlemen.  They  are 
so  viewed  by  all  classes.  They  are  very  expensive, 
and  very  exclusive.  They  are  designed  to  train 
statesmen,  men  of  leisure  and  local  squires.  They 
too  form  part  of  the  stratified,  caste-like  organiza- 
tion of  the  state. 

HIGH    FINANCE 

The  landed  class  is  also  the  financial  and  invest- 

George  was  successful.  The  land  was  ordered  reassessed  and  taxed 
at  its  value.  But  the  power  of  the  landowning  classes  was  so 
great  that  the  assessment  has  never  been  made.  A  press  dispatch 
announces  that  it  has  been  abandoned.  This  indicates  the  power 
of  the  feudal  aristocracy  in  England.  The  privileges  which  it 
enjoys  by  the  exemption  of  its  land  from  taxation  amounts  to  hun- 
dreds of  millions  of  dollars  a  year.  This  shows  the  economic 
foundation  of  British  politics.  It  indicates  the  profits  that  come 
from  the  making  of  laws.  The  methods  are  those  of  the  Roman 
patrician  and  the  French  nobility.  And  the  consequences  to  the 
people  are  the  same. 

[165] 


ing  class.  Its  ground  rents  are  colossal.  The 
ground  rents  of  the  aristocracy  have  gone  all  over 
the  world  in  quest  of  investments.  They  have  pene- 
trated into  backAvard  countries  and  have  carried  the 
army,  the  navy  and  the  colonial  administrator  with 
them,  Britain's  imperialistic  interests  are  a  by- 
product of  her  land  system.  And  British  imperial- 
ism, along  with  British  landlordism,  are  destroying 
Britain  as  they  destroyed  Rome.  The  best  blood  of 
England  is  absorbed  in  the  protection  of  this  empire, 
an  empire  born  very  largely  of  overseas  investments. 
The  fiscal  burden,  which  has  reached  crushing  pro- 
portions, is  an  imperialistic  burden.  It  too  con- 
tributes to  the  decay  of  the  Empire.  Added  to  this, 
the  local  taxes  are  assessed  exclusively  on  the  work- 
ing and  producing  classes.  The  landed  classes  pay 
scarcely  any  local  taxes  at  all.  Privilege  is  almost  as 
free  from  local  taxation  as  it  was  in  France  in  the 
eighteenth  century. 

England  is  in  a  state  of  progressive  decay.  This 
was  evident  long  before  the  war.  But  the  war 
brought  it  to  a  climax.  The  possession  of  bank 
credits,  supremacy  in  shipping  or  even  in  industry 
means  little  in  comparison  with  the  condition  of  the 
people.  Only  the  virility  of  the  Labor  Party,  the 
character  and  independence  of  the  intellectual 
groups,  the  searching  criticism  of  radical  organiza- 
tion and  the  splendid  traditions  of  free  discussion 
may  and  probably  will  bring  about  the  necessary  re- 
forms by  Parliamentary  action.     Yet  this  is  by  no 

[i66] 


means  certain.  British  privilege  was  arrogant 
enough  when  its  possessions  were  challenged  ten 
years  ago  by  Lloyd  George.  Privilege  used  all  Its 
power  to  protect  its  age-long  tax  exemptions,  and 
especially  to  prevent  the  use  of  taxation  to  break  up 
the  great  estates  of  the  aristocracy.  The  privileged 
classes  used  every  means  in  their  power,  political, 
economic  and  social,  to  thwart  democracy,  just  as  did 
the  Roman  senate,  just  as  did  the  Bourbon  caste  in 
France  prior  to  the  Revolution.  The  history  of  so- 
ciety in  fact  is  one  long  record  of  the  refusal  of  the 
ruling  classes  to  make  concessions,  until  it  is  engulfed 
either  in  revolution  or  is  itself  destroyed.  And  the 
present-day  coercion  of  Ireland,  India  and  Egypt  is 
an  indication  of  what  British  reaction  may  do  if  it 
should  be  challenged  by  a  labor  group  at  home. 

FRANCE 

France  has  a  stationary  birthrate.  That  does  not 
necessarily  mean  decay.  The  decay  of  France  is 
traceable  to  economic  and  financial  causes  that  are 
eating  out  the  vitality,  and  the  productive  capacities 
of  the  people.  These  economic  forces  control  her 
politics.  They  control  her  press.  They  shape  her 
foreign  policies.  They  have  diverted  the  power  of 
the  people  into  wrong  channels  and  have  so  molded 
political  thought  through  control  of  the  press  that 
France  is  guided  by  much  the  same  economic  theories 
that  brought  on  the  French  Revolution.     The  pea- 

[167] 


sant  contributes  to  this  static  condition.  His  for- 
eign investments  shape  the  foreign  and  the  domestic 
policy  of  the  nation.  It  is  the  hoarded  sou  of  the 
thrifty  peasant  that  is  responsible  for  the  aggressive 
imperialism  of  France. 

Banking  privilege  rules  Parliament.  Privileges  of 
all  kind  rule  industry  and  commerce.  They  rule  the 
professions  and  labor.  Privilege  in  France  is  all- 
pervasive.  It  chokes  freedom  of  action.  It  has 
so  inhibited  the  life  of  the  nation  that  the  production 
of  wealth  and  its  free  movement  to  the  markets  of 
the  world  is  needlessly  interfered  with  for  the  ex> 
elusive  benefit  of  the  banking,  protected  and  privi- 
leged groups  that  control  the  political  life  of  the 
country. 

Back  of  everything  else  is  the  power  of  the  great 
exploiting  banks  of  Paris  with  their  branches  all  over 
France.  They  have  weakened  the  industrial  power 
of  the  country  and  are  primarily  responsible  for  its 
aggressive  imperialism  as  well. 

The  peasants  are  bound  up  with  the  banking  syn- 
dicates through  their  foreign  inv^estments.  For  the 
$9,000,000,000  of  foreign  securities  are  owned  by 
the  peasants,  the  shop  keepers  and  the  workers.  As 
the  banks  think,  so  the  peasants  act  and  as  these 
banking  institutions  are  interested  primarily  in  for- 
eign securities,  the  peasants  rally  spontaneously  to 
their  opinions.  Woven  in  and  out  of  this  merger 
of  interests  are  countless  other  privileged  groups, 

[168] 


classes  and  industries,  each  of  which  seeks  its  own 
advantage  at  the  expense  of  the  whole. 

We  think  of  France  as  a  democracy.  She  has  a 
very  democratic  Constitution.  And  the  peasants 
with  the  banks  do  control  the  state.  But  the  con- 
trol of  the  press  and  the  agencies  of  public  opinion 
on  the  one  hand,  and  the  imperialistic  financial  in- 
terests on  the  other,  have  made  the  peasant  a  tool  in 
the  hands  of  the  exploiting  classes.  This  is  the  ex- 
planation of  contemporary  France.  This  is  her 
weakness. 

PRE-REVOLUTIONARY    EUROPE 

A  study  of  pre-revolutionary  Russia,  Prussia, 
Hungary  and  Austria  shows  the  same  kind  of  forces 
at  work  within  these  countries.  Prussia  escaped  in 
part  by  reason  of  the  social  legislation  of  the  past 
fifty  years,  the  popular  credit  institutions  which 
existed  all  over  the  country,  the  enlightened  policy 
of  education,  the  state-owned  railways  and  the  sys- 
tem of  peasant  ownership  which  prevailed  west  of 
the  River  Elbe  and  especially  in  South  Germany. 
FeudaHsm  in  Prussia  and  imperialistic  ambitions 
were  the  cause  of  Germany's  downfall.  It  was  in- 
ternal disease  that  brought  disaster  to  Germany,  as 
it  has  to  other  European  powers. 

In  Russia  and  Austria-Hungary  the  powers  of  re- 
action ran  their  course.  Along  with  military  re- 
verses they  brought  on  revolution.  For  political 
change  in  an  orderly  way  was  inhibited  by  the  feudal 

[169] 


classes.      Revolution     was     the      only     way     out. 
Orderly  political  change  was  impossible. 

If  we  study  the  nations  of  the  old  world,  from 
Rome  to  England,  from  Csesar  to  Lloyd  George,  we 
find  the  same  common  forces  at  work.  They  have 
produced  the  same  results.  Land  monopoly,  credit 
monopoly  and  Imperial  conquest  have  been  the  causes 
of  decay.  These  form  the  economic  background  of 
the  long  history  of  civilization.  And  In  all  of  these 
countries  political  control  was  merged  with  economic 
control.  They  acted  and  interacted  on  one  another. 
Through  them  the  land  was  monopolized;  unjust  and 
excessive  taxes  were  Imposed;  usury  was  exacted  and 
surplus  wealth  was  massed  for  imperialistic  con- 
quest. Surplus  wealth  was  first  used  to  exploit  the 
people  at  home,  It  was  then  used  to  exploit  defense- 
less peoples  overseas.  This  meant  more  taxes;  It 
meant  a  crushing  military  establishment;  It  Involved 
a  suppression  of  protest  and  Intellectual  freedom 
at  home  and  abroad.  This  Is  what  is  taking  place 
in  Egypt,  In  India,  in  Mesopotamia  and  Ireland. 
This  is  what  Is  planned  in  Mexico.  This  was  the 
story  of  imperial  Rome,  of  imperial  Spain  and  Por- 
tugal, of  Imperial  France  and  Imperial  England. 
Decay  in  all  these  countries  began  with  monopoly  of 
land  and  opportunities ;  It  ended  with  imperialism  and 
the  exhaustion  of  the  state  In  overseas  conquest. 
The  great  empires  of  the  world  have  been  de- 
stroyed not  by  enemies  from  without,  but  by  enemies 
from  within. 

[170] 


CHAPTER  XVI 

SABOTAGE 

Even  though  all  of  the  conclusions  of  the  preced- 
ing pages  are  not  accepted  it  will  be  generally  ad- 
mitted that  we  are  a  different  nation  than  we  were  a 
few  years  ago.  The  old  freedom  is  gone.  The  old 
opportunities  have  passed.  That  the  following  ten- 
dencies and  conditions  have  made  their  appearance 
Is  beyond  question. 

'  ( I )  Labor  is  taking  on  a  new  psychology.  The 
worker  is  dissatisfied  with  the  wages  relationship. 
He  wants  to  have  a  voice  in  Industry.  He  wants  to 
own  his  tools.  In  many  industries  there  is  a  dis- 
position to  slack.  Everywhere  there  is  a  growing 
reliance  on  direct  industrial  action  and  a  loss  of  con- 
fidence in  the  state. , 

We  cannot  complain  of  this  attitude  on  the  part  of 
labor,  for  our  national  philosophy  Is  a  philosophy 
of  sabotage.  Sabotage  has  been  sanctioned  by  the 
laws  of  the  land  and  by  public  opinion.  Sabotage 
had  its  origin  in  the  protective  tariff.  For  fifty  years 
scarcity  has  been  taught  as  a  most  desirable  thing. 
It  has  been  taught  by  the  press,  by  the  schools,  by 
political  parties  and  by  eminent  statesmen.     So  com- 

[171] 


pletely  have  we  accepted  the  idea  that  a  country 
grows  rich  by  scarcity  that  there  is  scarcely  a  voice 
raised  for  free  trade  which  a  generation  ago  enlisted 
the  best  thought  of  the  country. 

The  tariff  gave  birth  to  the  trust  and  to  other 
forms  of  sabotage.  The  trust  destroyed  competi- 
tion. That  is  its  underlying  motive.  It  prevents 
free  production.  Competition  means  quantity  pro- 
duction, with  prices  fixed  by  production  cost. 
Monopoly  is  not  a  natural  product.  It  is  not  a 
natural    evolution.     Monopoly   is   born   of   law 

MADE  PRIVILEGES  THAT  HAVE  THE  SANCTION  OF 
THE  STATE.  It  HAS  THE  APPROVAL  OF  PUBLIC 
OPINION  AND  THE  LAWS  OF  THE  LAND.       Monopoly 

limits  production.  It  sabotages  the  nation.  There 
is  scarcely  a  monopoly  that  is  not  born  of  laws  of 
our  own  making.  Labor  is  practicing  what  we  have 
endorsed  as  a  national  business  policy. 

(2)  Sabotage  is  not  confined  to  labor.  It  did 
not  originate  with  labor.  It  is  common  to  the  busi- 
ness world.  In  many  industries  profits  are  increased 
by  limiting  production.  The  coming  of  monopoly 
has  made  it  possible  to  close  mills,  mines  and  fac- 
tories and  to  recoup  for  the  loss  in  production  by  in- 
creased prices.  We  are  living  under  a  scarcity  sys- 
tem as  to  fuel,  iron  ore,  lumber,  food  and  all  raw 
materials.  Wherever  substantial  monopoly  pre- 
vails there  restricted  output  and  increasing  prices 
are  the  prevailing  tendencies  of  industry. 

(3)  The   railroads   and  transportation   agencies 

[172] 


also  sabotage  industry.  The  control  of  transporta- 
tion by  men  who  also  control  the  major  industries, 
creates  a  condition  in  which  it  is  to  the  interest  of 
railway  operators  to  prevent  competition.  The  in- 
terrelationship of  the  railroads  with  the  packers, 
warehousemen,  millers  and  speculators  leads  to  de- 
struction of  food  as  well. 

(4)  Most  important  of  all,  the  free  land  is  gone. 
No  longer  is  it  possible  for  the  pioneer  to  take  up 
a  homestead  in  the  West  and  build  his  own  for- 
tunes with  his  own  labor.  There  is  no  free  land. 
A  great  part  of  it  is  held  for  speculation.  Scarcely 
more  than  half  of  the  cultivable  land  is  under  cul- 
tivation at  all.  And  land  has  taken  on  a  speculative 
value,  a  value  that  has  risen  with  great  rapidity  dur- 
ing the  war.  These  speculative  values  keep  labor 
from  the  land.  They  take  almost  all  that  the  ten- 
ant produces.  This  leads  to  exhaustive  cultivation. 
Land  speculation  is  the  worst  form  of  sabotage. 
It  progressively  restricts  the  amount  of  wealth  pro- 
duced. It  increases  the  price  of  that  which  is  pro- 
duced. It  drives  an  increasing  percentage  of  peo- 
ple to  the  cities,  there  to  live  upon  a  progressively 
limited  output  of  food  and  wealth;  there  to  pay  in- 
creasing rents  for  the  privilege  of  living  on  the  land. 

(5)  Credit  is  essential  to  industry.  Yet  our 
credit  resources  are  under  the  control  of  banking 
syndicates,  whose  power  radiates  out  from  New 
York  to  the  farthermost  ends  of  the  nation.  These 
banking  syndicates  have  become  investment  agencies. 

[173] 


They  underwrite  monopolies,  railroads  and  foreign 
loans.  In  many  instances  it  is  to  their  interest  to 
suppress    competition    and    discourage    production. 

Our  banking  agencies  sabotage  the  country. 
They  provide  little  or  no  money  for  the  building  of 
homes.  They  limit  credit  to  the  farmer  and  charge 
usurious  interest.  Even  commercial  credit  is  diffi- 
cult to  obtain.  The  banks  are  identified  with  the 
maintenance  of  the  status  quo.  They  are  responsi- 
ble for  the  organization  of  the  monster  monopolies. 
To  encourage  competiton  means  to  undermine  the 
monopoly  securities  which  they  own  or  control. 
Moreover  the  banks  make  more  money  from  lending 
money  on  call  in  Wall  Street  than  they  do  from  loans 
for  legitimate  customers  who  deposit  their  money 
with  them.  Billions  of  dollars  are  invested  in  stock 
speculation,  In  manipulating  wheat,  cotton  and  other 
supplies,  while  the  farmers  of  the  West  and  the  peo- 
ple of  the  towns  are  crying  for  loans  with  which  to 
feed  and  house  themselves. 

(6)  The  banks  further  sabotage  the  country  by 
the  export  of  capital  and  credit  to  foreign  lands. 
This  Is  another  reason  why  there  is  not  enough  credit 
to  provide  for  our  own  most  urgent  needs.  The  ex- 
port of  credit  lessens  the  amount  of  credit  available 
for  our  own  activities.  Upwards  of  ten  billions  of 
dollars  have  been  loaned  abroad  and  hundreds  of 
millions  of  foreign  securities,  both  public  and  pri- 
vate, are  being  offered  at  high  rates  of  interest  to- 
day. 

[174] 


There  might  be  some  defense  of  the  export  of 
capital  if  banks  exported  their  own  money.  But 
they  export  other  people's  money,  which  should  be 
kept  for  the  use  of  those  who  deposit  it.  According 
to  the  Report  of  the  Comptroller  of  the  Currency 
for  19 19,  there  were  19,000,000  individual  de- 
positors in  the  national  banks  alone.  There  are 
12,000,000  depositors  In  the  savings  banks  and  prob- 
ably as  many  more  in  the  state  banks  and  trust  com- 
panies. 

The  resources  of  a  bank  consist  of  the  capital 
stock  invested  by  the  stockholders  and  the  deposits 
placed  in  the  banks  by  the  depositors.  The  stock- 
holders of  the  31,000  banks  of  the  country  have  in- 
vested only  $2,354,831,000  in  the  banking  business, 
while  the  individual  deposists  amount  to  $28,243,- 
416,755.  In  other  words,  for  every  dollar  invested 
by  the  stockholders  the  people  have  invested  twelve 
dollars.  Even  more  significant,  the  total  resources 
of  all  the  banks  amounts  to  $53,000,000,000,  or 
twenty-three  times  the  amount  of  the  capital  stock. 
In  some  way  or  other  the  people  have  invested  fifty 
billion  dollars  in  the  banks  of  the  country  as  op- 
posed to  something  over  two  billions  invested  by 
the  owners. 

Now  the  people  place  their  money  in  the  banks 
so  as  to  be  able  to  use  it  when  they  want  it.  They 
have  an  implied  right  to  borrow  back  their  own  and 
other  people's  deposits  when  they  need  them.  But 
the  banks  are  exporting  the  people's  money  and  in 

[175] 


so  doing  are  crowding  people  into  tenements,  they 
are  making  it  difficult  and  ofttimes  impossible  for 
the  farmer  to  market  his  crops,  they  are  sabotaging 
the  production  of  all  kinds  of  wealth  by  the  credit 
starvation  that  prevails  all  over  the  country. 

(7)  The  economic  state  has  passed  under  the 
almost  complete  control  of  a  small  group  of  men. 
They  control  the  banking  and  credit.  They  control 
the  mines  and  natural  resources,  the  transportation 
agencies  and  the  greater  trusts.  They  use  their 
power  to  create  and  maintain  a  system  that  sabo- 
tages the  freedom  of  society  and  the  production  of 
wealth  as  well.  The  captain  of  industry  has  be- 
come a  financier.  He  is  apart  from  industry.  Fre- 
quently he  is  a  lawyer.  More  frequently  he  is  a 
banker.  He  is  not  familiar  with  industrial  proc- 
esses. Monopoly  breeds  the  exploiting  type  of  man- 
agement. It  excludes  men  of  industrial  experience 
or  technical  ability  from  positions  of  power  and  in- 
fluence. This  shifting  of  industry  from  the  owner 
who  has  built  up  an  enterprise  and  who  knows  all 
about  its  processes  to  the  large  aggregations  of  cap- 
ital with  officers  in  New  York  is  accompanied  by  a 
change  in  the  motive  of  industry.  The  instinct  of 
the  owner  is  to  improve  processes,  to  increase  out- 
put, to  invite  invention.  The  motive  of  financial 
control  is  to  increase  security  issues,  to  inflate  prices, 
and  to  maintain  a  security  structure  irrespective  of 
the  quahty  or  quantity  of  output  or  the  improvement 
of  the  plant.      Monopoly  is  wasteful  and  inefficient. 

[176] 


We  see  this  in  public  utility  corporations,  in  the  rail- 
roads, in  the  greater  trusts  and  in  industries  that  are 
immune  from  competition. 

Not  only  has  the  motive  changed,  but  the  men  in 
control  are  unfamiliar  with  industry.  They  are  pro- 
moting bankers  or  security  merchants.  They  take  a 
share  of  the  security  issues  as  compensation  for  their 
services.  They  place  bankers  and  lawyers  on  the 
boards  of  directors  for  the  purpose  of  protecting  the 
corporation  or  to  insure  financial  support  in  its  under- 
takings. A  list  of  directors  of  the  large  corpora- 
tions in  the  City  of  New  York  indicates  the  extent 
to  which  the  major  enterprises  of  the  country  have 
passed  under  the  control  of  men  without  industrial 
experience.  It  shows  the  extent  to  which  these  en- 
terprises are  interlocked  with  one  another  and  with 
the  big  banking  institutions  of  the  metropolis.  The 
economic  state  is  passing  under  banking  control.  It 
is  taking  on  the  form  of  feudalism  and  its  inefficiency 
as  well. 

(8)  Economic  feudalism  creates  a  corresponding 
political  feudalism.  Those  who  own  the  country 
rule  it.  They  use  their  power  to  create  law  made 
wealth  and  law  made  burdens  which  are  borne  by 
the  producing  classes.  That  is  the  purpose  of  priv- 
ilege. 

As  a  result  of  the  perfection  of  monopoly  on  the 
one  hand  and  the  control  of  the  state  by  the  ex- 
ploiting interests  on  the  other  there  has  come  a  rapid 
and  colossal  increase  in  the  overhead  charges  of  so- 

[177] 


clety.  Sabotage  is  limiting  the  amount  of  wealth 
produced,  while  the  exploiting  interests  are  taking 
an  increasing  share  in  the  form  of  rent,  profits  and 
taxes.  An  increasing  part  of  the  currently  created 
wealth  is  being  absorbed  by  exploiting  groups  who 
render  no  return  for  the  tribute  which  they  take. 

The  members  of  the  exploiting  groups  are  in- 
creasing in  number  and  in  power.  Parasitism  is  be- 
coming a  caste.  This  caste  protects  itself  as  it  did 
in  Russia,  in  Prussia,  in  ancient  France,  by  the  use 
of  the  state.  It  uses  the  press  and  the  universities 
to  mold  pubHc  opinion;  to  give  sanctity  to  its  claims, 
and  to  protect  it  in  its  misuse  of  power. 

(9)  The  exploiting  groups  are  supported  by  la- 
bor. The  overhead  charges  are  produced  by  labor. 
They  can  come  from  nowhere  else.  The  net  result 
of  sabotage  on  the  one  hand,  and  overhead  on  the 
other,  is  that  there  is  less  and  less  wealth  for  the 
great  majority  of  the  people.  Labor  must  of  ne- 
cessity be  the  poorer  by  reason  of  this  burden. 

A  recent  official  enquiry  made  by  Dr.  Edward  B. 
Rosa,  Chief  Physicist  of  the  United  States  Bureau 
of  Standards,  shows  the  appropriations  for  the  fiscal 
year  1920  to  be  $5,686,005,706.  Of  this  92.8  per 
cent.,  or  $5,279,621,262,  were  expenses  attributable 
to  previous  wars  and  the  maintenance  of  the  war  and 
navy  departments,  while  only  7.2  per  cent,  was  used 
for  governmental  functions,  including  Congress,  the 
Executive,  public  works,  research  and  educational 
work.     The  total  budget  is  about  $50  per  capita  or 

[178] 


$250  per  family.  Yet  of  this  only  $1.50  per  capita 
is  spent  for  what  may  be  called  the  primary  func- 
tions of  government.  Scarcely  anything  is  spent  for 
those  most  in  need  of  aid. 

(10)  The  proximate  cause  of  these  conditions  is 
privileges  created  by  the  state.  A  cross  section  of 
one  phase  of  society  is  a  cross  section  of  another. 
Freedom,  equality  of  opportunity,  variety,  inven- 
tion are  being  suppressed  by  the  political  state. 

Freedom  is  fundamental  to  progress.  Freedom 
is  a  biological  command.  It  is  the  first  law  of  na- 
ture. It  is  her  inflexible  rule  of  life.  It  was  eco- 
nomic freedom  that  made  America  what  she  is.  It 
was  economic  freedom  that  spanned  the  continent, 
that  developed  our  resources,  that  harnessed  power 
and  made  it  a  servant  of  man.  It  was  economic 
freedom  that  converted  the  ignorant  and  oppressed 
of  Europe  into  the  captains  of  industry.  For  three 
centuries  liberty  was  the  dominant  note  in  American 
hfe. 

Privilege  is  a  denial  of  freedom.  There  can  be 
no  privilege  without  an  equivalent  loss  of  freedom, 
just  as  there  can  be  no  master  without  a  slave. 
Privileges  are  economic.  They  are  created  by  law. 
When  privilege  becomes  powerful  enough,  it  becomes 
the  state.  If  we  examine  the  governments  of  the 
world  to-day,  outside  of  those  that  have  passed 
through  a  revolution,  we  will  see  that  the  political 
state  is  rarely  an  agency  of  human  rights.  It  does 
not  represent  people.     It  does  not  represent  even 

[179] 


property.  It  represents  privilege.  The  privileged 
classes  make  the  laws  and  administer  them.  They 
increase  the  tribute  which  they  take  and  the  number 
of  persons  within  the  privileged  groups.  Ultimately 
the  privileged  classes  become  incompetent.  They 
exclude  talent  and  abihty  from  political  power,  just 
as  they  are  excluded  from  industrial  power.  That 
is  what  is  happening  in  America  to-day.  This  is 
what  has  happened  to  Great  Britain  and  France. 
The  personnel  of  the  last  Congress  as  well  as  the 
nominees  for  the  Presidency  is  a  measure  of  the  class 
in  control  of  our  political  life.  The  political  state 
is  always  a  reflection  of  the  economic  state  and  of 
the  class  in  control  of  the  economic  state.  This  is 
as  true  of  the  aristocracies  as  it  is  of  the  democracies 
of  the  world.  England,  France,  Switzerland,  Bel- 
gium, Denmark,  Australia,  and  the  United  States 
are  alike  in  this :  the  class  that  controls  the  economic 
state  controls  the  political  state  as  well. 

When  privilege  becomes  ascendant,  decay  sets  in. 
The  mediocre  man  rises  to  power.  Invention,  initia- 
tive, variety,  change  endanger  the  status  quo.  They 
question  the  established  order.  For  this  reason  they 
must  be  suppressed. 

Decay  has  already  set  in  in  America.  This  is  true 
of  agriculture.  That  will  hardly  be  questioned. 
The  farmer  is  so  helpless  before  the  privileged 
groups  that  surround  him  that  he  cannot  protect  him- 
self or  even  save  his  calling  from  destruction.  Con- 
ditions in  the  West  are  not  the  result  of  the  war  or 

[i8o] 


of  any  passing  condition.  They  are  the  inevitable 
consequence  of  the  environment  of  the  farmer  by  ex- 
ploiting interests  that  will  not  restrain  themselves 
and  cannot  be  restrained  by  the  state  because  they 
are  the  state.  The  same  thing  is  true  of  the  rail- 
roads. It  is  true  of  the  building  of  homes  and  the 
opening  up  of  farms.  It  is  true  of  many  industries, 
notably  coal  mining.  If  we  could  correctly  analyze 
our  industrial  system,  the  slackening  of  production, 
the  waste,  and  the  sabotage,  we  would  be  forced  to 
admit  that  decay  was  affecting  our  whole  economic 
life. 

Stratification  is  becoming  the  rule.  So  is  con- 
formity. Initiative  and  effort  are  discouraged. 
This  is  true  not  only  of  labor,  it  is  true  of  the  pro- 
fessional and  engineering  classes.  Talent  is  denied 
an  opportunity  to  play.  The  biological  processes 
are  being  superseded  by  artificial  processes  designed 
to  maintain  a  privileged  group  in  power.  Society 
ceases  to  function  normally  and  freely.  The  poison 
of  privilege  slowly  penetrates  to  the  working  groups. 
In  time  they  take  on  the  vices  of  the  ruling  class. 
They  become  indifferent,  hopeless,  hostile.  This  is 
the  inevitable  consequence  of  the  control  of  society 
by  a  parasitical,  privileged  class. 


[i8i] 


CHAPTER  XVII 

A  NATURAL  SOCIETY 

The  political  state  is  very  different  from  the  agencies 
that  man  has  evolved  in  his  other  activities.  It  is 
complicated,  unnatural,  inexpert.  It  may  be  that  the 
maladjustment  of  society,  the  inequitable  distribu- 
tion of  wealth,  the  poverty  in  the  midst  of  plenty, 
are  traceable  to  the  conflict  of  the  political  state  with 
normal,  natural  laws,  which  if  applied  in  our  political 
relations  would  usher  in  a  new  world.  We  are  in- 
clined to  forget  that  political  society  is  man-made. 
It  is  a  survival  of  earlier  economic  relations.  It  is 
an  institution  too  in  which  government  is  in  the  hands 
of  a  small  and  relatively  incompetent  and  untrained 
group  interested  largely  in  exploitation.  The  ruling 
class  is  the  group  that  owns  rather  than  the  group 
that  works.  It  is  a  group  that  exploits  rather  than 
a  group  that  produces.  And  the  primary  object 
of  the  group  that  rules  is  to  live  by  the  labor  of 
others.  The  state  is  an  agency  of  landlords,  capi- 
talists and  of  parasitical  dependants  that  are  at- 
tached to  and  dependent  on  the  exploiting  groups. 

[182] 


The  privileges  they  enjoy  are  in  conflict  with  a  nat- 
ural order  of  society.  They  have  so  enmeshed  our 
life  that  society  is  in  a  jungle.  Privileges  are  created 
to  transfer  wealth  from  the  producing  classes  to  the 
class  which  rules.  This  is  done  by  statute  law.  It 
is  through  special  privileges  that  the  state  controls 
the  distribution  of  wealth.  Only  in  primitive  socie- 
ties does  the  state  represent  the  people  as  a  whole. 

In  addition  the  constitutions  and  the  laws  under 
which  we  live  are  not  in  harmony  with  the  laws  of 
nature.  They  are  at  variance  with  the  laws  of 
biology.  Political  society  is  an  artificial  thing;  so 
artificial  that  the  instincts  and  powers  of  men  func- 
tion with  difficulty  or  not  at  all.  This  is  why  so- 
ciety decays.  This  is  why  we  do  not  have  more 
wealth  and  a  better  distribution  of  the  blessings  of 
civilization. 

THE    LAWS    OF    NATURE 

The  law  of  nature  is  equality  of  opportunity;  a 
free  field  and  no  favors.  Nature's  laws  are  laws  of 
freedom.  They  promote  variety.  They  encour- 
age initiative.  They  stimulate  resourcefulness. 
The  laws  of  nature  endow  no  group,  class  or  individ- 
ual with  any  special  privileges.  Privilege  only 
exists  under  organized  society.  Privilege  can  exist 
only  by  law. 

The  privileges  which  the  ruling  class  creates  and 
which  give  them  power  are  all  economic.  And  an 
analysis  of  the  modern  state  discloses  that  laws  con- 

[183] 


ferrlng  power  upon  the  few  at  the  expense  of  the 
many  relate: 

(i)   To  the  possession  of  land; 

(2)  To  the  resources  of  the  earth; 

(3)  To  transportation  and  the  highways; 

(4)  To  credit  agencies  for  the  transfer  and  ex- 
change of  wealth  in  form  or  in  place; 

(5)  To  taxation; 

(6)  To  franchises  for  public  service  corporations, 
to  patent  rights  and  to  direct  grants  of  a  monopoly 
character  from  the  government  to  individuals  or  cor- 
porations. 

These  and  the  artificial  organization  of  govern- 
ment are  the  agencies  through  which  a  privileged 
class  controls  society  in  its  own  interest.  These 
too  are  the  agencies  that  have  brought  empire  after 
empire  to  decay.  These  also  are  the  means  by 
which  wealth  is  transferred  from  the  class  which 
produces  to  the  class  which  exploits. 

THE    FRENCH    PHILOSOPHERS 

Let  us  briefly  examine  this  subject.  The  French 
physiocrats  or  philosophers,  Rousseau,  Turgot, 
Quesney  and  Diderot,  who  profoundly  influenced  the 
French  Revolution  saw  the  feudal  regime  as  a  con- 
fused jungle  of  laws  and  customs  made  and  admin- 
istered by  the  grand  seigneur.  They  advocated  a 
new  philosophy;  the  law  of  nature;  a  philosophy  of 
freedom  in  all  the  relations  of  life.  They  advo- 
cated a  sweeping  away  of  the  endless  laws  that  regu- 

[184] 


lated  every  industry  and  every  activity,  and  the  in- 
troduction of  a  natural  order  in  whicii  men's  en- 
ergies would  play  freely  in  every  realm  of  life. 
The  physiocrats  were  probably  the  wisest  political 
philosophers  the  world  has  known. 

The  teachings  of  these  philosophers  were  inter- 
preted in  Great  Britain  by  Adam  Smith.  He  too 
saw  a  way  out  of  the  old  regime  by  clearing  away 
the  underbrush  of  feudal  legislation  which  enmeshed 
society.  His  work,  "  The  Wealth  of  Nations," 
has  remained  a  textbook  of  clear  economic  thinking 
ever  since.  It  too  advocated  liberty  and  freedom 
in  the  industrial  world.  But  the  teachings  of  Adam 
Smith  were  converted  by  the  privileged  groups  into 
a  means  for  protecting  the  existing  economic  sys- 
tem. They  distorted  the  law  of  nature  to  mean 
that  the  state  should  keep  hands  off  all  property; 
that  land  monopoly  and  industrial  monopoly  should 
remain  unimpaired.  Let  the  landlord  take  as  much 
rent  as  he  pleases;  let  him  own  as  much  land  as  he 
can,  permit  the  capitalist  to  own  the  tools  and 
machines  and  take  his  profit  from  industry;  sanc- 
tion the  existing  laws  of  property  and  remove  all 
restraints  on  the  owning  classes  and  a  natural  state 
will  result  in  which  men  will  find  their  place  in  the 
social  and  economic  scale  according  to  their  abili- 
ties. 

As  the  landlords  and  business  classes  controlled 
Parliament,  they  impressed  this  philosophy  upon 
the  laws  of  the  land.     And  for  over  a  century  it 

[185] 


has  ruled  the  thought  of  Great  Britain.  But  this 
doctrine  of  laissez  faire,  so-called,  is  a  violation  of 
the  laws  of  nature.  At  the  very  outset  it  sanc- 
tions monopoly  of  opportunity,  and  a  limitation  on 
the  freedom  of  men  in  all  their  economic  and  in- 
dustrial activities.  Land  monopoly,  transportation 
monopoly  and  credit  monopoly  decree  that  other 
classes  must  work  for  and  serve  the  owning  classes. 
There  can  be  no  freedom  with  these  basic  agencies 
in  private  hands. 

America  accepted  the  British  interpretation  of 
nature's  laws  and  made  it  her  own.  We  sanctioned 
the  British  laws  of  property  and  commanded  the 
state  to  keep  hands  off  of  our  economic  life.  We 
too  turned  the  land,  the  resources,  transportation 
and  credit  over  to  private  control  and  then  appealed 
to  the  struggle  for  existence  in  which  inequality  of 
opportunity  was  ordained  from  the  start. 

Nature  recognizes  no  such  economic  priorities. 
Nature  recognizes  only  one  law  and  that  is  the 
ownership  of  wealth  by  the  labor  that  produces  it. 
Nature  sanctions  equality  of  opportunity.  The  real 
law  of  nature  is  a  fair  field  and  no  law-made  favors. 

THE    ARTIFICIAL    STATE 

Man  has  not  only  violated  nature's  laws  of  prop- 
erty; he  has  violated  nature's  laws  in  our  social 
relations  as  well.  We  have  created  a  highly  arti- 
ficial political  state.  It  is  highly  centralized;  dif- 
ficult of  operation,  and  so  distant  from  the  people 

[i86] 


that  they  cannot  control  it.  A  natural  society  is 
a  local  society.  It  should  be  simple  rather  than 
complex.  It  should  be  part  of  our  everyday  life 
and  be  lodged  in  the  hands  of  the  producing  classes. 
Yet  the  reverse  is  true.  The  state  is  in  the  hands 
of  lawyers,  editors,  bankers.  It  should  be  in  the 
hands  of  farmers,  workers,  engineers,  builders. 
The  state  is  not  adjusted  to  the  needs  of  those 
classes  who  should  control  the  evolution  of  society. 
The  state  is  so  complicated  that  it  cannot  be  used  by 
the  mass  of  the  people.  It  can  only  be  used  by 
privileged  groups. 

THE    INDUSTRIAL    STATE 

A  natural  state  would  disappear  into  the  indus- 
trial state.  It  would  be  part  of  our  everyday  life. 
It  would  aid  wealth  production,  wealth  distribution 
and  promote  the  cultural  life  of  the  people.  We 
should  be  as  unconscious  of  the  political  state  as  we 
are  of  the  human  body. 

There  is  no  more  reason  for  a  dual  state,  for  the 
political  state  superimposed  upon  the  industrial 
state,  than  there  was  for  the  ecclesiastical  state 
superimposed  upon  the  political  state.  The  ec- 
clesiastical state  has  passed  away.  The  political 
state  should  be  integrated  with  the  industrial  state, 
and  with  the  everyday  activities  of  the  people. 

The  imperial  state  in  Russia  broke  down  not  be- 
cause of  the  revolution  alone.  It  broke  down  be- 
cause it  was  in  collapse.     It  ceased  to  serve  the  most 

[187] 


elementary  needs  of  the  people.  It  was  directed 
by  a  small  group,  for  the  most  part  ignorant  and 
indifferent  to  anything  save  their  selfish  class  inter- 
ests. They  thought  of  the  state  only  as  a  means 
of  enriching  themselv^es  and  of  protecting  them- 
selves through  the  political  power  which  they  en- 
joyed. There  was  little  local  autonomy,  practically 
no  self-government.  Finally  the  state  ceased  to 
function.  It  died  not  because  of  the  revolution, 
but  because  of  its  own  Inertia. 

The  same  is  true  of  the  centralized  Parliamen- 
tary governments  of  Great  Britain  and  of  France. 
This  was  obvious  at  the  Paris  Peace  Conference. 
The  rulers  of  the  world  were  helpless;  helpless  to 
solve  the  big  industrial  and  social  problems  which 
confronted  them.  They  were  equally  helpless  to 
direct  Imperial  problems.  They  met  the  situation 
by  the  creation  of  more  privileges,  privileges  of  a 
financial  sort,  of  an  economic  sort.  They  at- 
tempted to  recall  the  closed  state  of  the  seventeenth 
century.  The  political  state  has  broken  down  as 
a  result  of  the  war. 


[i88] 


CHAPTER  XVIII 

RUSSIA 

One  need  not  accept  the  Russian  revolution  or 
the  methods  employed  by  its  leaders,  to  see  in  the 
soviet  organization  of  government  the  most  nearly 
natural  organization  of  society  the  world  has  ever 
known.  The  local  community  is  the  center  of  the 
people's  life.  There  is  no  fixed  and  inelastic  con- 
stitution to  interfere  with  the  will  of  the  commun- 
ity at  every  turn.  The  soviet  is  substantially  au- 
tonomous. It  can  do  pretty  much  as  it  pleases.  It 
can  own  things  and  operate  things.  Most  im- 
portant of  all  it  is  organized  as  an  industrial  agency, 
representation  in  the  soviet  being  according  to  pro- 
fessions, trades,  industries.  The  government  is  in- 
dustrial; it  is  local;  it  reflects  the  social  needs  of 
the  people.  When  the  imperial  government  broke 
down,  the  peasants  devised  a  biological  society. 
They  quite  naturally  organized  a  state  suited  to 
their  daily  needs.  They  adjusted  it  to  getting  food 
and  fuel,  to  dividing  up  the  land,  to  providing  such 
protection  as  was  needed.  They  did  as  men  nat- 
urally do  in  emergencies.     They  created  a  society 

[189] 


of  equal  opportunity.  It  is  impossible  to  create 
special  privileges  in  such  a  simple,  local  organiza- 
tion. For  special  privileges  are  only  created  under 
a  government  that  cannot  be  controlled  by  the  peo- 
ple; they  are  usually  created  under  distant  parlia- 
mentary forms  and  by  means  which  the  people  can- 
not understand. 

The  Russian  soviet  shook  the  exploiting  classes 
off  the  backs  of  the  people.  It  tested  each  man  by 
his  usefulness.  The  peasant  could  see  no  reason 
why  he  should  turn  over  a  large  part  of  what  he 
produced  to  an  idle  landlord  living  in  Petrograd  or 
Moscow.  He  could  see  no  reason  for  supporting 
himself  and  another  person  as  well.  Quite  natur- 
ally he  decided  to  work  for  himself.  He  stopped 
paying  rent. 

The  cooperative  movement  came  into  existence 
quite  naturally  in  such  a  society.  There  was  need 
of  exchange  and  distribution.  But  the  peasants 
were  unwilling  to  pay  some  one  else  to  perform  these 
functions  when  they  could  do  them  for  themselves. 
So  they  organized  cooperative  societies  for  buying, 
selling  and  distributing;  they  organized  their  own 
banks  and  credit  agencies;  they  used  their  own 
money  for  their  own  needs. 

The  same  thing  took  place  in  the  mines  and  the 
factories.  The  workingmen  decided  to  run  them 
themselves.  They  wanted  to  get  rid  of  interest 
and  profits.  And  they  sought  to  adjust  industry, 
highly  complex  though  it  is,  to  a  natural  order  in 

[190] 


which  men  owned  their  tools  and  controlled  their 
own  life,  as  did  the  peasants  in  the  fields. 

The  industrial  life  of  the  community  was  merged 
with  the  political.  The  duality  of  society  came  to 
an  end.  The  political  institutions  became  part  of 
the  economic  institutions.  Both  were  operated  by 
the  producing  classes.  The  exploiting  groups  dis- 
appeared. There  was  no  one  who  was  willing  to 
support  them,  no  one  willing  to  pay  rent  or  profits. 
And  when  rent  and  profits  disappeared,  the  political 
power  of  the  aristocracy  came  to  an  end. 

ENDING    IMPERIALISM 

The  central  government  at  Moscow  shifted  from 
one  group  to  another  until  it  became  a  government 
that  reflected  the  producing  classes.  And  as  it  was 
responsive  to  the  local  Soviets  it  too  evolved  a  nat- 
ural order  of  society.  It  abolished  all  kinds  of 
privileges;  it  took  over  the  banks,  the  mines,  and  the 
forests.  It  ended  secret  diplomacy.  It  ended  im- 
perialism. It  returned  Persia  to  the  Persians  and 
Manchuria  to  the  Chinese.  The  government 
could  not  do  otherwise.  For  the  government  was 
a  government  of  producers.  It  had  no  interest  in 
conquest.  As  soon  as  economic  privilege  came  to 
an  end,  imperialism  came  to  an  end  also.  The 
peasants  had  all  the  land  they  could  work  in  their 
own  little  villages;  the  artisan  could  not  work  at 
home  and  in  some  distant  land  as  well.  There  was 
nothing    to    be    gained    from    ruling    other   people. 

[191] 


The  state  was  interested  only  in  the  peasant  and  the 
worker.  It  had  no  interest  in  other  peasants' 
lands.  It  was  not  idealism  alone  that  led  Russia 
to  renounce  conquest.  It  was  an  economic  system 
that  made  imperialism  impossible.  Other  people's 
lands  were  a  liability;  they  were  a  burden;  they 
yielded  no  return;  they  involved  heavy  naval  and 
military  expenditure.  Imperialism  fell  with  the 
fall  of  the  old  idea  of  the  state.  The  old  state 
was  like  a  pyramid  inverted.  When  it  toppled 
over  and  was  re-erected  on  the  new  basis,  the  old 
ambitions  of  the  imperialist  state  passed  away. 

A    BIOLOGICAL    STATE 

The  Russian  state  is  as  nearly  a  biological  state 
as  anything  the  world  has  known.  Men  hold  only  as 
much  land  as  they  can  cultivate.  This  is  the  law 
of  nature.  Equality  of  opportunity  has  become  the 
rule  of  life.  The  taking  over  of  the  tools  by  the 
workers  is  a  back  to  nature  movement.  Men  now 
live  without  asking  permission  from  some  other 
man  to  do  so.  Industrial  freedom  has  taken  the 
place  of  industrial  feudalism.  Russia  is  an  approxi- 
mation of  the  philosophy  of  Rousseau  and  the 
French  philosophers  who  believed  that  a  natural 
society  should  be  a  free  society,  free  from  privileges 
in  any  form. 

The  Russian  revolution  like  all  revolutions  is  a 
protest  again  overhead  charges.  It  is  a  revolu- 
tion   against    unjust    taxes,    against    ground    rent, 

[192] 


against  the  exactions  of  capital.  Like  the  French 
revolution  it  was  an  economic  revolution.  It  threw 
off  the  feudal  system.  The  Irish  revolution  is  a 
land  revolution.  It  is  a  protest  against  the  eco- 
nomic control  of  Irish  life  by  English  land  owners 
and  English  business  men.  For  a  large  part  of  the 
land  in  Ireland  is  still  owned  by  alien  landlords 
while  its  commercial  life  is  under  the  control  of 
British  capital. 

All  over  Europe  the  revolutions  of  the  past  two 
years  have  been  revolutions  against  the  overhead 
charges  of  taxes,  rent  and  profits,  against  an  arti- 
ficial state  used  by  the  few  for  the  exploitation  of 
the  many. 

And  stripped  of  accessories,  the  outstanding  fact 
of  revolutionary  Europe  is  that  men  are  now  work- 
ing for  themselves.  They  no  longer  work  for 
landlords,  for  capitalists.  They  keep  what  they  pro- 
duce. The  power  of  the  aristocracy  ceased  when 
it  lost  its  land.  The  same  is  true  of  the  bourgeoisie. 
Their  political  power  collapsed  when  their  profits 
were  taken  away.  The  new  state  had  to  rely  on  the 
talent  of  the  working  classes.  It  had  to  build  a 
producers'  society.  And  there  was  only  one  class 
to  which  it  could  appeal. 

ECONOMIC    FOUNDATIONS    OF    POLITICS 

Contemporary  Europe  presents  a  demonstration 
of  the  economic  foundations  of  politics.  It  shows 
that  the  political  state  mirrors  the  economic  state. 

[193] 


The  prevailing  economy  in  Eastern  Europe  to-day 
is  peasant  proprietorship;  the  prevailing  political 
system  reflects  such  proprietorship.  The  soviet  re- 
flects the  village  and  the  needs  of  the  village.  The 
imperial  idea  of  the  state  could  only  live  with  land- 
lordism and  capitalism.  It  came  to  an  end  when 
capitalism  came  to  an  end.  The  revolution  in 
Russia  freed  180,000,000  people  from  rent,  profit 
and  interest.  Much  more  important,  it  freed  them 
from  fear,  it  awakened  hope,  it  called  forth  inven- 
tion, It  ended  sabotage.  It  made  people  free  from 
any  one  but  themselves. 

It  may  be  that  attack  from  without  and  counter 
revolution  from  within  have  recreated  the  centralized 
state;  It  may  be  that  personal  liberty  is  again  under 
political  censorship  and  control;  it  may  be  that 
Russia  will  fail  in  Its  attempt  to  rear  a  new  society. 
It  may  be  that  a  single  nation  cannot  inaugurate  a 
new  society  on  such  ideals  with  the  world  arrayed 
against  It.  It  Is  possible  that  authority  may  shift 
again  from  the  local  units  to  Moscow  and  that  am- 
bitious men  may  acquire  military  or  political  power. 
It  may  be  that  the  workers  and  peasants  of  Rus- 
sia, of  whom  a  very  large  per  cent,  cannot  read  or 
write,  have  been  kept  in  ignorance  and  suppression 
for  so  long,  that  there  Is  not  sufficient  courage  or 
intelligence  to  build  a  new  society.  But  If  failure 
should  come  It  should  not  be  ascribed  to  the  Ideals 
that  animated  the  revolution,  it  should  not  be  at- 
tributed to  the  attempt  to  call  Into  being  a  natural 

[194] 


society;  rather  it  should  be  charged  to  the  old  regime 
that  all  but  destroyed  the  nation  by  its  abuses,  its 
incompetence  and  most  important  of  all  by  its  intol- 
erance of  intellectual  freedom.  This  and  the  organ- 
ized imperialism  of  France  and  Great  Britain,  aided 
and  abetted  by  the  United  States,  are  the  primary 
causes  of  conditions  in  Eastern  Europe,  whose  crime 
is  a  desire  for  a  better  society  in  which  privileges  of 
all  kinds  shall  be  banished  from  the  earth  and  men 
shall  be  permitted  to  use  their  powers  in  their  own 
way  and  to  keep  the  wealth  which  their  labor  pro- 
duces.    This  is  the  crime  of  revolutionary  Europe. 


[195] 


CHAPTER  XIX 

FREEDOM 

If  the  preceding  analysis  of  society  is  correct,  it  is 
imperative  that  means  be  found  to  reverse  the  tend- 
encies that  are  shaping  our  civilization  and  pos- 
sibly bringing  on  decay.  These  changes  must  be 
fundamental.  They  must  cut  deeper  than  criminal 
proceedings  against  the  individual  man,  regulatory 
commissions,  or  palliatives  that  seek  to  preserve 
existing  institutions  but  protect  us  from  their  ex- 
cesses. The  changes  must  be  economic  not  personal. 
They  must  alter  the  economic  structure  of  society. 
If  society  is  to  progress  and  civilization  is  to  ad- 
vance we  must  find  some  means  to : 

( 1 )  Reduce  the  burden  of  overhead  of  taxes, 
ground  rent  and  profits  that  now  appropriate  a 
great  part  of  the  wealth  produced. 

(2)  Release  labor  from  the  wages  relationship 
that  is  paralyzing  initiative  and  destroying  hope, 
and  in  so  doing,  is  sabotaging  the  productive  powers 
of  the  nation. 

(3)  Free  the  land  and  the  natural  resources 
from  private  control,  and  open  them  up  to  access 

[196] 


by  capital  and  labor  on  the  farm,  In  the  city,  and 
in  the  mine.  Access  to  the  source  of  all  life  is  the 
first  necessity  of  a  free  society. 

(4)  Free  the  railways  and  waterways  from  the 
power  of  monopoly  interests  to  restrict  production 
and  maintain  control  over  our  industrial  life. 

(5)  Convert  the  banking  and  credit  resources  of 
the  country  into  public  or  cooperative  agencies ;  into 
agencies  to  stimulate  the  productive  powers  of  so- 
ciety. 

(6)  Create  such  conditions  that  men  will  find 
their  proper  employment  and  use  their  talents  will- 
ingly, hopefully,  and  imaginatively  in  contributing 
to  the  economic,  political  and  cultural  life  of  the 
state. 

These  are  the  conditions  that  should  Inhere  in 
a  free  society;  a  natural  society.  These  conditions 
have  existed  in  the  past.  They  have  been  inter- 
fered with  by  privilege;  for  the  most  part  by  law- 
made  privilege.  Society  is  enmeshed,  much  as  it 
was  In  the  old  regime  by  conditions  of  Its  own  mak- 
ings. It  Is  denied  an  opportunity  to  function  freely 
and  naturally  In  Its  social  and  economic  activities. 

THE   ALTERNATIVE   TO    PRIVILEGE 

The  alternative  to  privilege  is  freedom  in  all  the 
relations  of  life.  Freedom  Is  nature's  order.  It 
is  the  order  of  all  primitive  societies;  It  was  the 
order  that  prevailed  In  America  for  two  hundred 
years.     It  was  this  that  made  us  what  we  are. 

[197] 


Freedom  involves  but  little  interference  by  the 
state  with  the  individual  or  with  industry.  It  in- 
volves access  to  opportunities  of  all  kinds.  It  is 
primarily  economic.  Freedom  means  the  ending 
of  the  strangle-hold  which  the  laws  of  the  land  have 
conferred  upon  the  few.  Freedom  will  open  up 
opportunities  to  initiative  and  talent.  It  will  re- 
lease trade,  commerce  and  productive  processes 
from  restraints  by  the  state.  Freedom  involves 
free  trade  between  nations  as  well  as  between  the 
forty-eight  states  of  the  union. 

Freedom  involves  the  enactment  of  but  a  few 
laws.  These  laws  relate  to  land,  to  transportation, 
to  credit,  and  in  a  lesser  way  to  patents.  It  is  about 
these  basic  privileges  that  the  present-day  evils  in- 
here. With  these  privileges  ended,  freedom 
would  come  in.  It  would  change  all  relations  of 
life,  economic,  political  and  social.  The  ending  of 
privilege  would  call  a  new  class  into  politics;  a  pro- 
ducers' class.  It  could  change  the  press.  It  too 
would  reflect  the  economic  foundations  of  a  free 
society.  The  universities  and  the  schools  would 
mirror  the  new  economic  relationships,  just  as  to- 
day they  mirror  the  privileged  society  which  con- 
trols the  state.  Our  cultural  life  would  respond  to 
this  release,  as  would  the  talents  and  initiative  of 
the  people. 

This  is  the  kind  of  society  that  prevailed  in  Amer- 
ica up  to  about  1880.     It  was  a  free  society,  a  pro- 

[198] 


ducers'  society.  Men  did  not  rely  on  the  state. 
They  rehed  on  themselves.  There  were  few  law- 
made  privileges,  and  our  political  and  economic  life 
was  almost  exclusively  in  the  hands  of  the  producing 
classes.  There  are  some  survivals  of  free  industry 
to-day.  We  see  it  in  the  dollar  watch,  in  the  cheap 
automobile.  No  patents,  grants  or  privileges  inter- 
fere with  the  free  play  of  these  industries.  Prices 
are  low.  Production  is  at  a  maximum.  There  is 
real  competition.  It  is  true  the  wages  system  pre- 
vails; there  is  still  price  control.  But  this  is  because 
only  a  few  industries  are  involved,  and  the  basic 
privileges  of  land  monopoly,  of  transportation,  of 
credit,  and  of  taxation  are  still  under  private  con- 
trol. But  at  least  we  see  the  possibilities  of  indus- 
trial freedom  and  the  effect  upon  the  genius  and 
talent  of  the  people  when  freedom  has  a  chance  to 
play. 

INVITATIONS    TO    A    FREE    SOCIETY 

The  legislative  changes  involved  in  freedom  are 
few  in  number.  They  fall  within  four  groups. 
They  are: 

( 1 )  The  taxation  of  land  values  and  the  resources 
of  the  earth  so  as  to  force  them  into  use  and  their 
most  efficient  use. 

(2)  The  socialization  of  transportation  and  the 
means  of  communication. 

(3)  The  dedication  of  banking  and  credit  exclu- 

[199] 


sively  to  production,  and  the  decentralization  of  con- 
trol from  the  money  centers  back  to  the  producing 
groups. 

(4)  Democracy  in  industry  and  the  participation 
of  labor  in  the  processes  of  production.  Guild  So- 
cialism, cooperation,  and  labor  partnership  are  sug- 
gestions for  releasing  the  resourcefulness  of  the 
worker  and  for  enlisting  his  Interest,  his  enthusiasm, 
and  his  ambition  In  his  employment. 

These  proposals  look  to  a  new  kind  of  liberty. 
They  propose  but  little  reliance  upon  the  state. 
They  involve  no  bureaucratic  organization  of  society. 
They  minimize  the  political  state,  rather  than  exalt 
It.  They  look  to  a  revival  of  the  individual  man; 
and  to  the  free  play  of  man's  Ingenuity  on  the  re- 
sources and  capital  of  society. 

These  proposals,  too.  are  in  harmony  with  what 
we  know  of  nature's  laws.  They  are  biological 
rather  than  artificial.  They  suggest  a  return  to  the 
early  traditions  of  America;  to  the  time  when  man 
controlled  his  economic  environment  and  shaped  his 
life  with  his  own  hands.  He  was  not  then  a  part 
of  a  machine.  He  controlled  the  machine.  He 
was  Inspired  by  hope.  He  enjoyed  all  the  wealth 
that  his  labor  produced,  unexploited  by  political  and 
economic  agencies  which  he  did  not  control. 

These  economic  changes  would  usher  in  a  social 
revolution  without  the  use  of  force.  They  would 
create  a  new  society  In  a  few  years'  time.  Wealth 
would  be  more  equitably  distributed.     There  would 

[200] 


be  more  to  distribute  while  the  overhead  of  interest, 
profit  and  rents  would  be  retained  by  the  producing 
classes.  In  time  labor  would  receive  all  that  labor 
produced.  The  farmer  would  receive  what  he  pro- 
duced. So  would  the  artist  and  the  professional 
man.  So  would  the  merchant  and  the  manufacturer, 
the  inventor  and  the  engineer.  The  Edison  and 
the  Ford  would  be  rewarded  in  a  free  society  as  they 
are  to-day.  Under  natural  conditions  men  would 
receive  all  the  wealth  that  their  mind  or  their  hand 
produced.  They  would  receive  it  without  diminu- 
tion by  taxation  or  otherwise.  They  would  be  per- 
mitted to  use  it  without  interference  by  the  state. 

The  changes  suggested  involve  no  reorganization 
of  society.  They  involve  no  complicated  system  of 
laws  or  administrative  decrees.  Rather  they  involve 
the  repeal  of  the  laws  that  privilege  has  enacted  so 
as  to  permit  the  laws  of  nature  to  play  freely  on  the 
opportunities  and  resources  of  the  earth.  With 
land  and  labor  free,  with  credit  dedicated  to  produc- 
tive uses,  with  transportation  open  to  all  on  equal 
terms,  with  patents,  franchises  and  other  grants 
opened  up  to  use,  then  the  advances,  the  inventions, 
the  discoveries  of  civilization  would  contribute  to  the 
well  being  of  man.  Then  science  would  be  man's 
servant;  then  the  machine  would  relieve  him  of 
labor.  Then  the  mind  of  man  would  be  free  to  play 
on  the  possibilities  of  life  as  it  never  has  before  in 
the  history  of  man. 

[201] 


CHAPTER  XX 

THE  FIRST  STEP 

Is  it  a  good  thing  that  men  should  be  permitted  to 
hold  land  and  refuse  to  use  it?  Is  it  a  wise  arrange- 
ment for  millions  of  acres  to  be  held  in  great  feudal 
estates?  Should  human  beings  be  herded  in  slums 
with  building  sites  in  abundance  close  by  in  the  sub- 
urbs? Is  there  any  justification  for  speculation  in 
land  as  a  result  of  which  men  go  hungry  and  live 
close  crowded  in  one,  two  and  three-room  tenements? 
What  can  be  said  of  an  economic  system  that 
permits  the  iron  ore  deposits  of  Minnesota,  which 
a  few  years  ago  were  worthless  lands,  to  be  capital- 
ized at  $800,000,000  and  held  by  a  single  corpora- 
tion, when  iron  ore  is  basic  to  the  civilization  in 
which  we  live?  What  can  be  urged  in  defense  of 
the  ownership  of  practically  all  of  the  anthracite 
coal  of  the  country  by  four  railroads,  and  the  con- 
trol of  much  of  the  bituminous  coal  by  railroads, 
mining  corporations  and  individuals  who  sabotage 
production  and  limit  the  output?  Is  greater  unwis- 
dom possible  than  the  rule  we  have  adopted  for  the 

[202] 


disposition  of  our  land  and  mineral  and  lumber  re- 
sources ? 

man's  relationship  to  opportunity 

What  should  be  the  rule  of  man's  relationship  to 
the  resources  of  the  earth?  Should  he  own  as  much 
as  he  can  seize,  irrespective  of  whether  he  uses  it  or 
permits  it  to  lie  idle?  Or  is  there  some  other  sanc- 
tion of  title,  a  sanction  that  satisfies  divine  law,  nat- 
ural law  and  a  properly  ordered  society  as  well? 

i  The  first  act  of  the  peasants  in  the  revolutions 
that  swept  over  Central  Europe  was  the  appropria- 
tion of  the  great  estates  and  the  distribution  of  the 
land  among  the  people.  This  was  the  first  step  in 
the  French  Revolution  of  a  hundred  and  thirty  years 
ago.  In  every  revolutionary  upheaval  of  Europe 
the  peasants  took  the  land  and  distributed  it  among 
themselves.  They  refused  longer  to  pay  rent  or  to 
work  as  serfs  on  another  man's  land.  The  princi- 
ple followed  in  the  redistribution  of  land  was  to  give 
a  man  as  much  as  he  could  cultivate.  He  could  have 
no  more  than  he  could  himself  use.  Title  was  sanc- 
tioned by  use  alone.( 

TAXATION   A    MEANS   TO    INDUSTRIAL    FREEDOM 

America  is  not  likely  to  adopt  revolutionary 
methods  in  dealing  with  the  land  question.  We  are 
too  long  trained  to  political  action.  Our  traditions 
are  those  of  orderly  evolution.  And  land  monopoly 
can   be   corrected   by   orderly   processes.     The    re- 

[203] 


sources  of  the  earth  can  be  opened  up  by  taxation; 
by  the  taxation  of  land  values.  This  can  be  accom- 
plished by  the  repeal  of  all  indirect  taxes,  both  cus- 
toms and  excise,  as  well  as  all  taxes  on  houses,  build- 
ings, improvements,  and  personal  property,  and  the 
placing  of  all  taxes,  federal,  state  and  local  on  land. 
Speculation  in  land  would  then  be  impossible.  The 
burden  of  taxation  would  end  land  monopoly  and 
open  up  land  for  use.  It  would  absorb  ground  rent. 
This  does  not  mean  that  10,000  acres  of  farming 
land  in  Kansas  or  Iowa  would  pay  the  same  taxes 
as  10,000  acres  in  the  metropolis  of  New  York. 
Land  would  be  taxed  at  its  selling  value.  The  land 
underlying  New  York  is  assessed  at  over  $5,000,- 
000,000.  It  yields  $250,000,000  in  ground  rents. 
The  mineral  resources  (coal,  iron  ore,  oil,  natural 
gas,  copper,  gold  and  other  deposits)  would  also  be 
assessed  at  their  capital  value.  Suburban  building 
land  would  be  assessed  at  its  value.  Upon  the  valu- 
ation so  made  a  direct  tax  would  be  levied  to  meet 
the  needs  of  society. 

It  would  be  assessed  upon  the  actual  value  of  the 
land  irrespective  of  improvements.  Opportunity, 
not  effort,  would  be  taxed.  This  would  end  idle 
land  speculation.  It  would  compel  men  to  use  their 
land  or  sell  it.  Society  would  say  that  the  only  title 
to  land  was  a  title  based  on  use.  Men  could  only 
sleep  on  their  opportunities  by  paying  for  the  privi- 
lege. They  could  not  hold  resources  for  their  chil- 
dren or  their  children's  children ;  they  could  not  wait 

[204] 


for  population  to  grow  about  their  land  and  by 
so  doing  increase  their  wealth  while  they  idled  their 
time  in  some  distant  pleasure  resort. 

Under  this  proposal  men  would  have  three  alter- 
natives: They  could  cultivate  their  land  or  build 
upon  it;  they  could  hire  labor  to  cultivate  it  or  build 
upon  it;  or  they  could  sell  their  land  to  some  one  else 
to  cultivate  or  build  upon  it.  The  same  would  be 
true  of  all  mineral  resources.  Under  any  circum- 
stances land  would  be  taxed  into  use.  It  would  be 
impossible  to  hold  it  idle.  Men  would  have  to  use 
their  holdings  or  dispose  of  them. 

OPENING    UP    A    CONTINENT 

Under  such  an  impulse  great  quantities  of  land 
would  seek  buyers,  just  as  millions  of  ancestral  acres 
of  land  in  England  have  been  broken  up  into  small 
holdings  as  a  result  of  the  death  duties  imposed  dur- 
ing the  war;  just  as  land  in  Australia  has  been  di- 
vided among  proprietors  by  increasing  the  land  tax. 
A  land  values  tax  would  automatically  distribute 
land  to  those  who  desired  to  use  it.  It  would  open 
up  building  sites  in  the  cities,  suburban  sites,  mines, 
oil  land,  and  all  kinds  of  mineral  land  as  well.  In 
time  the  land  of  America  would  call  for  labor.  It 
would  lure  men  from  the  cities.  Men  could  then 
own  a  farm  of  their  own.  There  would  be  oppor- 
tunities like  a  newly  discovered  continent. 

With  land  seeking  men,  men  would  be  freed.  No 
one  need  work  for  another  if  he  chose  to  work  for 

[205] 


himself.  With  taxes  removed  from  houses  and  im- 
provements, there  would  be  a  stimulus  to  build,  an 
encouragement  to  industry,  a  cheapening  of  the  prod- 
ucts of  labor.  With  the  increase  in  wealth  produc- 
tion which  would  follow,  and  its  freedom  from  taxes, 
prices  would  fall.  Under  these  conditions  a  man 
could  not  slack,  upon  the  land.  He  could  not  slack 
on  mines,  standing  timber,  or  other  resources. 

Here  is  a  natural  means  for  ending  sabotage  of 
the  land.  Here  is  a  natural  means  of  ending  feudal- 
ism, and  for  converting  every  man  into  a  free 
citizen.  Here  is  a  means  of  creating  unlimited  op- 
portunities for  labor.  The  mere  existence  of  oppor- 
tunity frees  a  man  from  the  wage  relationship.  The 
man  who  can  work  for  himself  is  never  a  wage  slave. 
He  has  a  sense  of  freedom,  a  sense  of  power.  He 
can  work  for  himself  or  for  some  other  man.  The 
labor  shortage  due  to  the  stoppage  of  immigration 
has  demonstrated  that. 

The  taxation  of  mineral  sites  would  have  the  same 
effect.  It  would  no  longer  be  possible  to  hold  an- 
thracite and  bituminous  coal  out  of  use.  Coal  de- 
posits would  have  to  be  worked  to  pay  the  taxes. 
Oil  land  could  not  be  held  idle.  Nor  could  timber 
land.  The  basic  monopolies  would  be  broken  by 
this  procedure.  Moreover  they  would  be  opened  up 
to  use.  Coal-mining,  oil  drilling,  and  the  production 
of  all  kinds  of  raw  materials  would  be  subject  to 
competition.  The  cost  to  the  consumer  would  be 
fixed  by  labor  cost  and  capital  cost  rather  than  by 

[206] 


a  scarcity  cost  which  is  now  possible  because  of  the 
close  monopoly  of  these  resources. 

THE    NEW    FREEDOM 

Freedom,  mental  as  well  as  economic,  would  be 
the  great  gain  from  the  change.  It  would  react 
upon  the  mind  of  America.  It  would  enable  men 
to  be  home-owners  instead  of  tenants.  Home- 
owners have  always  been  free  men.  It  is  this  that 
lies  back  of  the  democracy  of  France.  It  is  this  that 
explains  the  democracy  of  Denmark.  It  Is  this  that 
gave  birth  to  the  new  Irish  movement,  just  as  it  is 
this  that  has  made  AustraHa  and  New  Zealand  the 
democratic  countries  that  they  are.  Democracy, 
both  economic  and  intellectual,  is  traceable  to  the 
relation  of  the  people  to  economic  opportunities  and 
especially  to  the  land.  No  people  has  ever  been  free 
that  was  a  tenant  people.  They  were  not  free  in 
Russia,  nor  in  feudal  Prussia,  any  more  than  they 
were  free  in  feudal  France  before  the  Revolution. 
And  we  need  only  go  out  to  Texas,  to  Oklahoma 
and  to  other  sections  of  the  West,  where  tenancy 
has  become  a  system,  to  find  the  same  economic, 
social  and  intellectual  conditions  appearing  that  pre- 
vailed in  Europe  under  the  feudal  system. 

INDUSTRIAL    DEMOCRACY 

With  the  land  free  industrial  democracy  would 
come  in  as  a  matter  of  course.  The  employer  would 
have  to  recognize  the  spiritual  as  well  as  the  eco- 

[207] 


nomic  demands  of  the  worker.  Labor's  standard 
of  living  would  be  determined  by  the  free  men,  not 
the  subject  men.  This  is  what  always  happens  when 
there  are  more  jobs  than  men  seeking  jobs.  Under 
free  conditions  the  employer  would  have  to  make 
terms  with  the  worker.  And  these  terms  would 
carry  with  them  a  freedom  and  a  participation  in 
industry  on  the  part  of  the  employee  that  is  not  pos- 
sible when  opportunities  are  limited  and  closed  by 
the  owning  classes. 

The  production  of  wealth  would  be  stimulated  in 
such  a  free  society.  Taxation  of  land  value  would 
stimulate  industry.  Men  would  have  to  produce  to 
meet  the  demands  of  the  tax-gatherer.  Quite  as 
important,  the  cost  of  many  commodities  would  fall. 
The  heavy  overhead  of  indirect  taxes  running  into 
the  billions  would  be  taken  off  wealth  and  consump- 
tion, and  would  fall  upon  land  values.  And  all 
economists  are  agreed  that  taxes  on  land  values  re- 
main where  they  are  placed.  They  cannot  be 
shifted.  They  reduce  the  ground  rent  of  the  owner 
but  they  do  not  increase  prices.  All  industry,  all 
commodities,  all  services,  all  incomes,  would  then 
be  freed  from  taxation,  as  would  all  articles  of  con- 
sumption. 

Freedom  to  use  the  resources  of  the  earth  is  the 
first  step  in  industrial  democracy.  It  is  basic  to 
all  others. 


[108] 


CHAPTER  XXI 

FREE  COMMUNICATION 

In  the  congressional  discussion  of  the  railroad 
question  the  Railroad  Brotherhoods  alone  offered 
a  proposal  that  suggested  a  properly  organized 
transportation  system.  The  measure  fathered  by 
them  known  as  the  Plumb  plan  provided  for  pur- 
chase and  permanent  ownership  of  the  railroads  by 
the  government  and  their  operation  by  a  corporation, 
made  up  of  five  representatives  of  the  public  ap- 
pointed by  the  President,  five  representatives  chosen 
from  the  ofl^cial  groups  to  represent  executive  and 
engineering  experience  and  five  representatives 
selected  by  the  classified  employees.  This  board 
was  directed  to  merge  the  railroads  into  a  single 
system,  to  unify  water  and  rail  transport  and  to 
develop  trucking  so  as  to  make  deliveries  from  the 
producer  to  the  consumer. 

The  profit-making  motive  was  to  be  eliminated 
from  operation.  The  plan  provided  for  a  fixed  re- 
turn on  the  capital  investment  and  the  distribution 
of  surplus  earnings  over  and  above  operating  costs 
and  fixed  charges  to  the  Government  and  the  em- 

[209] 


ployees  on  a  fixed  scale.  There  were  provisions  for 
wage  boards  to  adjust  wages  controversies  while  the 
Inter-state  Commerce  Commission  was  given  con- 
trol of  rates  and  charges. 

This  was  the  first  proposal  of  organized  labor  for 
an  assumption  of  responsibility  in  industry.  It  was 
America's  interpretation  of  industrial  democracy  or 
Guild  Socialism.  The  measure  treated  capital  as 
entitled  to  only  a  fixed  return.  It  placed  the  control 
of  transportation  in  the  hands  of  those  most  con- 
cerned over  it,  to  wit,  the  public  as  consumers,  the 
workers  as  producers,  and  the  professional  talent  as 
entrepreneur.  Quite  as  important,  the  measure  of- 
fered a  plan  for  calling  into  the  industry  the  talent 
of  two  million  employees,  the  dedication  of  the  trans- 
portation agencies  to  the  production  of  wealth  and 
its  cheap  and  rapid  distribution  as  well. 

Congress  showed  little  interest  in  any  of  these 
considerations.  The  transportation  act  provided  a 
guarantee  of  dividends;  protection  to  security  hold- 
ers and  opportunities  for  waste  and  exploitation.  It 
contained  few  provisions  for  a  system  of  transporta- 
tion such  as  is  found  in  other  countries,  or  even  for 
such  a  system  as  was  developed  under  government 
control. 

THE   FUNCTION   OF   TRANSPORTATION 

A  properly  conceived  transportation  program 
would  look  upon  the  railroads  as  agencies  of  serv- 
ice, rather  than  of  profit.     Their  function  is  to  trans- 

[210] 


port  goods  and  persons  at  a  minimum  cost.  So  ad- 
ministered transportation  would  become  a  great 
agency  of  industrial  and  cultural  development. 
Population  could  be  distributed  out  into  the  country 
as  an  aid  to  the  housing  problem.  The  railroads 
can  remake  city  life.  But  the  most  important  serv- 
ice is  the  development  of  the  country.  The  rail- 
roads should  stand  at  every  man's  door  inviting 
him  to  produce  to  the  fullest  with  an  assurance  that 
his  produce  will  find  a  market.  They  should  dis- 
courage the  long  haul  and  promote  the  short  haul. 
They  should  build  up  agriculture  about  our  cities 
rather  than  thousands  of  miles  away.  They  should 
promote  home  markets  rather  than  distant  markets. 
They  should  localize  industry  rather  than  distribute 
it.  They  should  develop  water  ways,  harbors  and 
terminals.  They  should  use  the  water  power  of  the 
country  not  only  for  the  railroads  but  for  industry 
and  domestic  use. 

RAILROAD    POLICIES    OF    OTHER    COUNTRIES 

We  get  a  suggestion  of  what  a  socially  organized 
transportation  system  can  accomplish  from  countries 
where  the  railroads  are  operated  by  the  Government. 
This  is  true  of  every  country  in  Europe  where  gov- 
ernment operation  prevails.  The  Industrial  devel- 
opment of  Germany  was  largely  traceable  to  the 
highly  developed  system  of  water  and  rail  transport. 
The  manufacturer,  trader  and  farmer  had  free,  equal 
and  cheap  transportation  not  only  to  every  part  of 

[211] 


the  Empire  but  to  every  part  of  the  world.  The 
railroads  were  operated  to  promote  the  productive 
resources  of  the  country.  This  was  the  policy  of 
the  German  railways  from  the  time  they  were  taken 
over  in  the  eighties  down  to  the  outbreak  of  the  war. 

No  other  agency  contributed  more  to  the  upbuild- 
ing of  the  Empire  than  the  state  owned  railroads. 
Their  administration  was  decentralized.  Every 
chamber  of  commerce,  every  agricultural  association 
was  in  sympathetic  contact  with  the  central  adminis- 
tration. They  looked  after  local  industries.  They 
formulated  local  rates  and  charges.  If  a  mine  or 
an  industry  needed  encouragement,  low  freight  rates 
were  granted  to  enable  it  to  get  on  its  feet.  When 
Germany  determined  to  have  a  merchant  marine  of 
her  own,  the  railroads  hauled  coal,  steel  and  lumber 
to  the  shipbuilding  plants  at  a  low  cost.  Food  was 
carried  from  the  eastern  provinces  to  the  industrial 
sections  of  western  Germany  at  favorable  rates, 
while  the  shipper  engaged  in  foreign  trade  received 
preferential  rates  to  enable  him  to  meet  the  competi- 
tion of  other  countries.  Often  goods  were  hauled 
below  cost  to  develop  an  industry  or  a  section  of  the 
country. 

The  rivers,  harbors  and  canals  were  developed. 
The  finest  water  terminals  in  Europe  are  found  on 
the  Baltic,  the  North  Sea,  and  along  the  River  Rhine 
from  Duisberg  to  Mannheim.  They  are  equipped 
with  marvelous  docking  and  trans-shipment  facil- 
ities.    These  harbor  terminals  are  linked  with  the 

[212] 


railroads  in  such  a  way  as  to  encourage  both  rail  and 
water  transportation.  Upwards  of  $250,000,000 
has  been  spent  by  Prussia  alone  for  the  development 
of  her  waterways  in  spite  of  the  fact  that  the  water- 
ways competed  with  the  railroads. 

AUSTRALIA 

Australia  uses  her  state  owned  railroads  in  the 
same  way.  To  encourage  agriculture,  cheap  rates 
are  made  upon  farm  machinery,  on  fertilizers,  on 
building  materials.  The  farmer's  produce  is  han- 
dled for  him  at  a  minimum  cost.  The  railway  sta- 
tion agent  performs  the  functions  performed  in  this 
country  by  a  score  of  middlemen.  He  receives  a 
consignment  of  a  dozen  chickens,  a  thousand  head  of 
cattle,  or  a  carload  of  wheat  and  gives  a  receipt  for 
them  which  can  be  used  by  the  farmer  to  secure  a 
loan  at  the  bank.  Upon  delivery  to  the  station 
agent,  the  farmer's  concern  is  at  an  end.  Poultry, 
sheep,  cattle,  wheat  are  shipped  to  the  seaboard; 
there  cattle  are  killed  and  cold-storaged  by  the  state 
in  a  state  owned  slaughter-house.  Wheat,  oats  and 
other  produce  are  warehoused  in  the  same  way.  Ul- 
timately a  cargo  is  made  up  and  shipped  to  London 
on  a  state  chartered  steamer,  so  that  food  supplies, 
hides  and  wool  from  central  Australia  are  deposited 
in  England  and  there  sold  by  representatives  of  the 
Government  without  the  intervention  of  any  middle- 
man whatsoever.  The  railways  are  agencies  of  na- 
tion building  rather  than  of  profit  making. 

[213] 


DENMARK   AND   SWITZERLAND 

Little  Denmark  operates  her  railroads  to  develop 
her  markets  with  England  and  Germany.  They  are 
run  at  a  low  scale  of  freight  and  passenger  rates. 
The  official  policy  is  to  use  the  railroads  to  promote 
industry,  to  develop  commerce,  to  make  the  nation 
rather  than  railroad  owners  prosperous. 

Switzerland  is  substituting  the  white  coal  of  the 
Alps  for  the  black  coal  of  Germany  in  the  operation 
of  her  railroads.  The  Rhine  and  the  Rhone  have 
been  harnessed  by  great  hydro-electric  power  sta- 
tions whch  generate  power  at  a  very  low  cost.  A 
part  of  the  power  is  used  for  the  operation  of  the 
railroads  while  the  surplus  is  used  for  industry,  the 
lighting  of  streets  and  country  roads  and  even  for 
serving  the  peasants  in  their  homes  and  on  their 
farms.  All  this  has  been  done  since  the  railroads 
were  taken  over  by  the  government.  Bavaria  and 
Norway  have  electro-equipped  their  railroads  while 
Italy  is  planning  a  similar  development  to  free  the 
country  from  dependence  on  the  coal  supply  of  other 
countries.  It  is  to  the  profit  of  the  railroads  in  the 
United  States  to  refuse  to  develop  electric  power, 
for  the  railroads  are  the  largest  buyers  of  coal  in 
the  country.  Their  fuel  bill  amounts  to  at  least 
$4f;o,ooo,ooo  a  year.  As  the  railroads  buy  coal 
from  companies  owned  or  controlled  by  the  stock- 
holders of  the  railroads,  and  as  they  would  lose  their 
best  market  by  the  use  of  water  power,  such  a  de- 

[214] 


velopment  will  never  be  made  so  long  as  the  rail- 
roads are  in  private  hands. 

THE  .NEED  OF  A   COMPREHENSIVE   TRANSPORTATION 
PROGRAM 

America  is  in  need  of  a  nation-wide  transporta- 
tion program.  Transportation  should  be  studied 
from  the  point  of  view  of  the  producing  and  con- 
suming classes  rather  than  of  the  financiers  and  se- 
curity holders.  There  should  be  a  study  of  what 
has  been  done  in  other  countries,  of  the  gains  from 
unification  of  competing  railroads,  terminals  and  op- 
erating agencies.  Water  transportation  and  truck- 
ing should  be  treated  as  a  coordinate  part  of  rail 
transportation.  Such  questions  as  the  long  and 
short  haul,  the  needless  cross  hauls  and  empty  hauls 
due  to  the  maintenance  of  competing  systems  should 
be  inquired  into.  Efforts  should  be  made  to  sim- 
plify freight  classifications  as  well  as  to  adjust  rates 
and  charges  to  the  needs  of  industry  and  the  stimu- 
lation of  travel.  The  waste  involved  in  the  mainte- 
nance of  several  hundred  different  railroads  with 
their  thousands  of  useless  ofl'icials  and  worse  than 
useless  competition  should  be  ended  and  the  equip- 
ment of  the  roads  should  be  merged  under  a  single 
system.  The  same  is  true  of  terminals,  shops, 
motive  power,  cars  and  harbors.  The  advantages 
of  such  a  merger  was  shown  during  the  period  of 
government  operation.  The  cost  to  the  country 
from  the  maintenance  of  needless  officials  and  equip- 

[215] 


ment  runs  into  the  hundreds  of  millions  of  dollars 
annually  while  the  loss  to  the  country  in  inadequate 
transportation  amounts  to  as  many  millions  more. 

DIVORCE  THE  RAILROADS  FROM  BANKING  CONTROL 

Most  important  of  all  railroading  should  be  di- 
vorced from  banking  management.  Transportation 
should  be  in  the  hands  of  engineers  and  experts 
rather  than  in  the  hands  of  money  lenders.  It 
should  be  divorced  from  coal  mining,  from  intimacy 
with  the  trusts  and  monopolies,  from  the  community 
of  interest  that  now  prevails  through  banking  con- 
trol. It  is  not  so  much  the  tribute  the  railroads  take ; 
it  is  the  wealth  that  they  destroy  that  is  so  costly. 
Every  manufacturer,  every  independent  coal  oper- 
ator, every  independent  packer  and  warehouseman 
lives  in  fear  of  discrimination  or  inability  to  secure 
service.  It  is  this  that  is  checking  production  as  it 
is  destroying  agriculture. 

The  railroads  are  sabotaging  the  life  of  the  na- 
tion. They  are  progressively  reducing  the  produc- 
tion of  wealth.  As  they  exercise  a  powerful  con- 
trol over  the  press  and  Congress  these  facts  are  but 
little  known.  They  are  given  no  publicity.  Cham- 
bers of  Commerce  and  shippers  dare  not  complain 
and  such  organizations  as  do  protest  receive  but 
scant  notice  and  are  lacking  in  influence.  There  can 
be  no  real  freedom  to  the  economic  life  of  any  coun- 
try so  long  as  the  means  of  transportation  are  in 
private  hands. 

[216] 


CHAPTER  XXII 

FREE  CREDIT 

Credit  should  enable  those  who  possess  no  capital 
to  secure  capital.  It  should  be  an  agency  to  aid  men 
of  resource,  of  abihty,  of  integrity,  to  obtain  tools, 
machines  and  materials  so  that  they  can  use  their 
labor  most  effectively.  Credit  should  be  an  agency 
of  production  alone.  Its  control  should  be  in  the 
hands  of  the  producing  classes.  Its  proper  function 
is  to  convert  wealth  into  new  forms,  to  change  the 
wealth  a  man  does  not  want  into  wealth  that  he  does 
want.  It  should  translate  immobile  values  into 
liquid  values.  Credit  should  carry  the  wheat  of  the 
Dakotas  to  their  markets  in  New  York  and  in  Liver- 
pool. It  should  exchange  wheat  and  cattle  for  other 
commodities  that  the  farmer  wants.  What  Is  quite 
as  important,  it  should  enable  the  man  without  means 
to  acquire  a  home,  a  farm,  to  start  a  business,  to 
build  a  factory.  These  are  the  functions  of  credit. 
Credit  like  transportation  should  be  a  social  agency. 
It  should  be  impressed  with  a  pubHc  use. 

THE   SOCIAL    NATURE   OF    BANKING   AND    CREDIT 

Credit  should  be  a  by-product  of  our  economic 
life.     It  should  function  as  does  our  circulatory  sys- 

[217] 


tern,  not  as  a  thing  by  itself,  but  as  a  life-giving 
force  to  production,  distribution  and  exchange. 

Banking  should  be  largely  a  clerical  operation;  a 
means  of  testing  men's  integrity  and  character;  of 
passing  upon  the  value  of  securities  and  of  bringing 
economic  groups  and  interests  together  in  the  easi- 
est and  least  expensive  way. 

The  banks  and  credit  agencies  performed  these 
functions  in  the  early  days  of  the  country.  They 
were  local,  neighborhood  affairs.  They  ceased  to  be 
this  in  the  closing  years  of  the  last  century.  They 
were  converted  into  means  of  exploitation  and  are 
now  used  very  largely  to  strengthen  the  exploiting 
groups. 

There  are  many  ways  for  socializing  banking  and 
credit  to  make  them  agencies  of  social  service. 

PUBLIC    BANKS 

Banking  and  credit  are  partially  public  agencies 
in  Australia  and  North  Dakota.  The  Common- 
wealth Bank  of  Australia  is  a  state-owned  bank. 
It  was  organized  to  protect  the  farmers  from  extor- 
tion and  to  provide  adequate  and  cheap  credit  for 
development  purposes. 

North  Dakota  has  established  a  state  bank  with 
a  capital  of  $2,000,000.  It  is  the  legal  depository 
of  the  state,  of  the  cities,  counties  and  school  dis- 
tricts. It  was  opened  for  business  in  July,  19 19. 
By  December  its  resources  amounted  to  $17,000,000. 
It  has  made  very  substantial  earnings.     It  is  oper- 

[218] 


ated  like  a  private  bank,  but  with  the  sole  aim  of 
developing  farming  and  the  industrial  life  of  the 
state.  It  loans  money  to  the  farmers  and  has  cut 
down  interest  rates  by  at  least  2^  per  cent,  over 
rates  previously  paid.  Farm  loans  are  made  on  a 
long-time  amortization  plan.  The  borrower  pays 
7  per  cent,  on  the  original  amount  of  the  loan,  of 
which  6  per  cent,  is  interest,  and  the  balance  is  used 
to  liquidate  the  principal  in  about  34  years. 

The  bank  is  also  the  depository  of  private  banks 
in  the  state,  of  which  over  600  have  opened  accounts 
with  it.  It  is  the  clearing  house  of  other  institutions 
and  has  effected  a  great  saving  in  exchange  rates. 
The  bank  re-deposits  its  funds  with  local  banks  whose 
transactions  are  subject  to  its  supervision  in  so  far 
as  interest  rates  are  concerned. 

The  enacting  clause  of  the  measure  creating  the 
bank  describes  it  as  an  institution  "  for  the  purpose 
of  encouraging  and  promoting  agriculture,  commerce 
and  industry."  Its  original  capital  was  derived 
from  the  sale  of  $2,000,000  of  bonds  issued  by  the 
state,  while  the  bulk  of  its  deposits  are  those  of 
civil  divisions  of  the  state  which  are  required  to  make 
it  their  depository.  The  state  itself  guarantees  all 
the  deposits.  It  exempts  them  from  state,  county 
and  local  taxes. 

There  is  no  inherent  reason  why  banking  should 
not  be  a  public  function.  Banking  is  not  a  compli- 
cated business.  It  is  relatively  simple.  For  the 
banker  himself  fixes  the  terms  of  his  transactions. 

[219] 


He  determines  the  interest  paid  depositors,  as  well 
as  the  interest  paid  by  borrowers.  He  also  passes 
on  the  security  he  requires.  The  negligible  losses 
in  the  tens  of  thousands  of  cooperative  banks  that 
exist  all  over  Europe  operated  by  peasants  and 
workers  is  suggestive  of  the  simplicity  and  safety 
of  banking  operations. 

COOPERATIVE    BANKING 

Cooperative  banking  is  the  second  means  of  mobil- 
izing the  resources  of  the  country  for  use  by  the 
producers.  And  cooperative  banking  has  been  de- 
veloped to  a  remarkable  degree  during  the  last  50 
years.  The  cooperative  banking  institutions  of 
Europe  are  known  as  credit  unions  or  people's  banks. 
They  have  followed  the  lines  laid  down  by  the  orig- 
inal Raiffeisen  and  Schulze-Delitzsch  banks,  which 
originated  in  Germany  about  70  years  ago.  The 
Raiffeisen  banks  are  designed  to  aid  the  peasants,  es- 
pecially the  small  peasants  who  were  unable  to  se- 
cure credit  from  the  banks.  The  Schulze-Delitzsch 
banks  were  designed  to  aid  the  artisans.  Both  sys- 
tems have  spread  all  over  Europe,  especially  into 
Italy,  France,  Russia  and  Austria-Hungary. 

The  credit  unions  consist  of  groups  of  neighbors 
who  live  within  the  same  community,  or  of  workers 
in  a  trade  union  who  place  their  savings  with  one 
of  their  number  as  treasurer.  The  sums  deposited 
by  individuals  are  not  very  large,  but  the  aggregate 
deposits  are  sufficient  to  care  for  the  loans  required 

[220] 


within  the  community.  Loans  are  made  in  small 
amounts.  They  must  be  used  exclusively  for  pro- 
ductive purposes,  such  as  the  purchase  of  cattle  or 
machinery.  In  the  workers'  banks  they  are  used  to 
aid  men  to  buy  tools,  for  sickness  or  an  emer- 
gency. The  loans  are  covered  by  notes  which  are 
endorsed  by  one  or  more  persons.  The  loan  is  re- 
paid in  installments,  usually  covering  a  short  period 
of  time,  although  loans  are  made  for  long  periods 
under  amortization  plans.  Unlike  other  banks,  a 
man's  moral  character  figures  largely  in  the  making 
of  the  loan.  That  is  known  to  his  neighbors.  If 
he  is  not  thrifty,  if  he  is  not  a  good  farmer,  he  does 
not  secure  the  loan.  And  after  he  has  secured  it, 
he  is  watched  over  by  his  neighbors,  who  see  to  it 
that  he  spends  the  money  as  he  promised  to  spend 
it;  that  he  uses  his  credit  wisely,  and  that  he  repays 
it  when  he  agrees  to  do  so.  The  object  of  these 
banks  is  to  aid  men  without  capital.  It  is  a  means 
of  increasing  the  efficiency  of  the  man  who  has  noth- 
ing to  sell  but  his  labor. 

The  first  of  these  banks  was  started  about  1850. 
Latterly  they  have  been  growing  with  great  rapidity. 
There  were  16,000  Raiffeisen  banks  in  Germany  in 
19 13,  with  a  combined  capital  of  $650,000,000. 
There  were  65,000  such  banks  in  Europe  and  about 
5,000  in  Japan.  The  total  turnover  in  19 10  of  all 
these  people's  banks  was  $5,900,000,000.  Their 
losses  were  negligible. 

As  these  banks  grew  in  number  they  federated  into 
[221] 


regular  banking  institutions  with  headquarters  in  the 
cities.  These  central  banks  hold  the  deposits  of  the 
credit  unions  and  made  loans  back  to  them  for  local 
use.  The  central  banks  are  controlled  by  the  local 
credit  unions  and  through  them  the  resources  of  the 
peasants  and  the  workers  are  mobilized  so  that  they 
can  be  used  wherever  needed. 

The  credit  union  has  been  developed  in  Canada, 
where  300  banks  have  been  organized.  Not  one  of 
them  had  lost  a  penny  up  to  19 14.  The  states  of 
Massachusetts,  Rhode  Island,  New  York,  North 
and  South  Carolina,  Texas,  Wisconsin,  Utah  and 
Oregon  have  credit  union  laws,  and  in  Massachusetts 
and  New  York  they  are  growing  with  great  rapidity. 

THE    NECESSITY    FOR    NEW    BANKING   METHODS 

Public  banks,  the  cooperative  bank,  and  the  credit 
union,  are  suggestive  of  the  kind  of  institutions  which 
should  control  all  credit.  Credit  should  be  im- 
pressed with  a  public  use.  It  should  be  a  public  serv- 
ice, not  a  private  business.  The  money  of  the  peo- 
ple should  be  used  to  serve  the  people.  This  is  one 
of  the  first  needs  of  a  free  society.  Along  with  the 
land,  it  is  the  most  imperative  need,  if  we  would  re- 
lease the  productive  powers  of  the  country. 

There  must  in  fact  be  a  revolution  in  banking  and 
credit.  For  our  credit  resources  are  used  very 
largely  for  exploiting  purposes.  Control  is  concen- 
trated in  New  York,  Chicago,  MinneapoHs.     Much 

[222] 


of  our  credit  is  used  for  stock-gambling,  for  food 
gambling,  for  speculation  of  all  kinds. 

There  can  be  no  release  of  our  productive  powers 
until  the  reservoirs  of  credit  have  been  placed  under 
social  control  or  control  by  the  producing  classes  and 
by  them  dedicated  exclusively  to  their  proper  func- 
tion. Credit  should  go  out  to  the  farmer,  to  the 
worker,  to  the  manufacturer.  It  should  supply  tools 
and  machinery  to  the  man  of  character,  and  enable 
him  to  get  started  in  the  world.  It  should  build 
homes,  enable  men  to  buy  farms,  and  develop  the 
neglected  talent  of  the  nation.  New  mines  should 
be  opened  up,  and  the  labor,  and  resources  of  the 
country  should  be  brought  together  in  the  coopera- 
tive production  and  distribution  of  wealth.  Credit 
must  be  given  a  social  sanction.  Our  banking  agen- 
cies must  be  impressed  with  a  public  trust. 


[223] 


CHAPTER  XXIII 

INDUSTRIAL  DEMOCRACY 

A  SURVEY  of  the  revolutionary  movements  taking 
place  all  over  Europe  show  a  universal  drift  in  the 
direction  of  industrial  democracy.  The  widespread 
acceptance  of  the  idea  and  the  assurance  of  the  work- 
ers in  Russia,  Great  Britain  and  Italy,  suggests  the 
universality  of  the  idea  as  well  as  the  rapidity  with 
which  labor  is  rising  to  economic  if  not  to  political 
power.  The  workers  are  ignoring  the  political 
state.  They  are  losing  confidence  in  it.  They  feel 
that  it  does  not  represent  them  and  cannot  be  made 
to  do  so.  They  have  turned  to  the  industrial  state 
and  are  seeking  to  build  a  structure  of  their  own 
that  they  more  readily  understand. 

In  a  large  part  of  Europe  there  is  either  revolution 
or  the  preliminaries  of  revolution.  These  revolu- 
tions are  economic.  They  are  born  of  injustice  and 
the  exactions  as  well  as  the  incompetence  of  the  rul- 
ing classes.  They  are  an  attempt  to  be  free  from 
rent,  interest,  profits  and  taxes.  The  workers  and 
peasants  seek  to  be  rid  of  the  landlord  and  the  cap- 
italist.    In  its   essence  revolution  is  an  effort  to 

[224] 


throw  off  the  age  long  privileges  which  interfere  at 
every  turn  with  the  freedom  of  the  individual  man. 

REVOLUTIONARY    EUROPE 

In  Russia  we  have  a  communistic  state  in  which 
the  peasants  and  workers  own  the  land,  the  factories 
and  the  tools.  They  adopted  industrial  as  opposed 
to  political  action.  They  took  the  property  as  well 
as  the  privileges  of  the  ruling  class  and  have  under- 
taken a  syndicalistic  organization  of  society  along 
industrial  lines.  In  Italy  the  revolutionary  move- 
ment has  been  growing  in  power  during  the  past  six 
months.  It  has  followed  Russian  methods.  The 
workers,  who  had  been  locked  out  by  the  employers 
in  anticipation  of  a  general  strike,  took  possession 
of  the  mills  and  factories.  They  organized  their 
own  operating  staffs  and  secured  credit  from  the  co- 
operative banks  which  they  control.  They  sent  the 
output  of  the  mills  to  the  cooperative  stores  and 
wholesales.  The  Italian  workers  ignored  the  po- 
litical state  and  adopted  methods  with  which  they 
are  familiar  in  their  labor  unions  and  through  the 
cooperative  societies  which  have  been  developed  in 
great  numbers  both  during  and  prior  to  the  war. 
Similar  movements  are  developing  in  France,  as  they 
are  in  Great  Britain. 

We  are  living  in  a  new  world,  with  new  forces 
fermenting  in  men's  minds.  The  political  state  either 
cannot  or  will  not  face  conditions  until  it  is  too  late. 
Possibly  the  state  cannot  face  them.     No  individual 

[225] 


and  no  class  will  give  up  its  privileges.  Fear  leads 
to  efforts  to  strengthen  them.  The  recently  enacted 
railroad  bill,  the  resentment  of  the  banks  to  any 
attempt  to  provide  credit  for  farmers  and  home 
builders,  the  attitude  of  the  profiteering  class  and  the 
intolerance  of  the  press  and  Department  of  Justice 
toward  any  criticism  or  protest  are  manifestations 
of  the  same  spirit  that  preceded  the  Revolution  in 
France  a  hundred  years  ago,  just  as  it  manifested 
itself  in  the  countries  of  Europe  that  are  now  in  a 
state  of  convulsion.  Privilege  learns  nothing  from 
the  past.  It  relies  on  force  and  encircles  its  pos- 
sessions with  machine  guns  and  constabulary. 

Despite  the  revolutionary  tendencies  in  the  world 
to-day,  democracy  in  America  will  undoubtedly  rely 
on  the  ballot  for  a  long  time  to  come.  The  Non- 
partisan League  of  the  Northwest,  the  political  in- 
surgency of  Wisconsin  and  the  Pacific  Coast,  the 
rapidly  growing  cooperative  movement  and  the  de- 
velopment of  political  consciousness  on  the  part  of 
labor  are  all  evidences  of  a  deep  seated  belief  in  the 
possibilities  of  political  action  as  a  means  of  orderly 
economic  evolution.  We  have  no  heritage  of  igno- 
rance and  feudalism.  We  are  accustomed  to  free- 
dom and  to  the  ballot.  And  the  conditions  under 
which  we  suffer  can  be  changed  by  the  state,  once  the 
state  becomes  an  agency  of  the  class  that  produces 
rather  than  the  class  that  exploits. 

[226] 


A   PHILOSOPHY   OF    FREEDOM 

A  revolutionized  society  is  possible  that  avoids 
socialism  on  the  one  hand  and  communistic  syndical- 
ism on  the  other.  It  can  be  brought  about  by  few 
changes  and  by  a  very  few  laws.  It  involves  no 
regimentation  of  society  and  little  interference  with 
personal  liberty.  Rather  it  protests  against  such  in- 
terference as  it  does  against  the  enlargement  of  gov- 
ernmental powers.  It  involves  no  dictatorship  by  a 
class  and  no  violent  change  in  the  existing  machinery 
of  government.  Such  a  society  is  possible  by  the 
economic  changes  enumerated  in  the  preceding  chap- 
ter. They  would  shift  the  burden  of  taxes  from 
production  onto  privilege;  they  would  end  the  bur- 
den of  overhead  from  profits  and  ground  rent  by 
the  destruction  of  the  privileges  which  make  them 
possible.  They  would  destroy  the  major  monopolies 
that  control  the  lesser  ones  and  recreate  competition. 
They  would  free  the  worker  from  the  wages  rela- 
tionship and  end  the  sabotage  that  is  slowly  creeping 
into  all  industrial  processes.  They  would  usher  in 
freedom  and  equality  of  opportunity.  They  would 
change  politics  and  education.  They  would  strike  at 
the  feudal  control  of  society  and  end  the  conditions 
that  make  for  decay.  Most  important  of  all  they 
would  reestablish  our  traditions  of  freedom  and  re- 
distribute the  wealth  of  the  world  to  those  who  pro- 
duce it. 

[227] 


All  of  the  proposals  referred  to  look  to  freedom, 
to  freeing  the  land,  to  freeing  the  means  of  communi- 
cation, to  freeing  credit,  to  freeing  industry,  to  free- 
dom in  trade  and  most  important  of  all  to  freeing 
the  minds  of  men. 

FREEDOM   OF   TRADE 

A  free  society  involves  freedom  of  trade  with 
other  countries.  It  involves  the  razing  of  all  cus- 
toms barriers  and  the  ending  of  the  artificial  condi- 
tions made  possible  by  the  tariff  walls  that  encircle 
the  country.  The  protective  tariff  destroys  as  many 
industries  as  it  aids;  it  denies  us  the  advantages  of 
trade  with  other  countries;  it  produces  exotic  indus- 
try and  permits  of  the  maintenance  of  numerous 
plants  and  industries  that  should  never  have  been 
brought  into  existence.  With  free  trade  the  trust 
would  be  forced  to  meet  the  competition  of  other 
countries;  it  would  be  forced  to  improve  its  pro- 
cesses ;  to  introduce  improvements,  to  better  its  pro- 
duct and  to  sell  at  a  competitive  price.  Along  with 
this  the  abolition  of  all  customs  taxes  on  consump- 
tion would  reduce  the  overhead  cost  to  the  consumer 
who  pays  not  only  the  taxes  which  reach  the  treas- 
ury but  many  times  that  amount  in  the  additions  that 
are  made  to  prices  by  the  monopoly  charges  that  the 
tariff  makes  possible. 

America  of  all  countries  should  adopt  free  trade. 
We  have  the  most  highly  organized  industry,  we 
have  abundant  raw  materials,  we  have  the  most  in- 

[228] 


telligent  workmen  and  the  highest  per  capita  invest- 
ment in  machines  and  tools  with  which  men  work. 
Whatever  may  have  been  true  a  generation  ago, 
there  is  no  longer  danger  from  the  competition  of 
European  labor,  save  to  those  industries  that  are 
shielded  behind  the  tariff  wall  and  that  use  the  power 
which  it  gives  them  to  levy  tribute  on  the  public. 

FREE   MEN  ' 

With  economic  privileges  destroyed  all  other  re- 
lations of  life  would  undergo  a  change.  Economic 
power  would  be  shifted.  The  center  of  gravity 
would  pass  from  the  few  to  the  many.  The  psy- 
chology of  society  would  change  with  the  change  in 
economic  relations.  Men  would  no  longer  fear  for 
their  jobs.  They  would  no  longer  fear  their  master. 
The  wages  system  would  be  modified  or  ended  alto- 
gether. Men  could  so  easily  pass  from  one  job  to 
another  or  from  working  for  some  one  else  to  work- 
ing for  themselves  that  the  relations  of  master  and 
man  would  be  reversed.  Employers  would  then  seek 
workers.  They  would  compete  not  only  with  each 
other  but  with  the  free  land  which  would  offer  all 
men  a  home  and  a  farm  of  their  own.  Industrial 
democracy  or  labor  partnership  would  come  in  as  a 
matter  of  course.  Just  as  for  centuries  the  master 
worked  alongside  of  his  employees  and  trained  them 
to  follow  in  his  calling  so  in  a  free  society  a  new  kind 
of  partnership  or  cooperative  corporation  would  take 
the  place  of  the  capitalistic  forms  which  now  prevail, 

[229] 


All  over  Europe  from  the  twelfth  to  the  eight- 
eenth centuries  industry  was  organized  on  a  cooper- 
ative basis.  It  was  the  most  human  and  in  many 
ways  the  most  perfect  form  of  industrial  organiza- 
tion the  world  has  ever  known.  It  was  the  guild 
system  that  adorned  Europe  with  cathedrals,  with 
beautiful  cities,  with  palaces  and  town  halls  that 
remain  to  this  day  the  most  splendid  monuments  of 
the  old  world.  There  was  art  and  peace  and  con- 
tent under  the  guild  system  before  the  private  cor- 
poration and  the  monopoly  of  capital  and  credit 
changed  the  relations  of  men  from  one  of  fraternal 
comradeship  to  the  impersonal  thing  it  has  become 
to-day. 

COOPERATIVE    INDUSTRY 

There  is  no  reason  to  doubt  the  ability  of  the  peo- 
ple to  reestablish  industrial  democracy  or  their  ca- 
pacity to  organize  successful  cooperative  under- 
takings for  carrying  on  the  business  and  industry  of 
the  world.  The  success  of  cooperation  in  Great 
Britain,  in  Denmark,  Germany,  Belgium,  Russia  and 
Italy,  not  to  speak  of  other  European  countries  dem- 
onstrates the  ability  of  the  people  to  develop  an 
industrial  state  along  cooperative  as  opposed  to  cap- 
italistic lines.  But  we  need  not  go  to  Europe  for 
proof  of  the  possibilities  of  cooperation.  The 
farmers  of  Minnesota  have  organized  and  success- 
fully manage  2,700  cooperative  societies.  They 
do    an   annual   business    of   $108,000,000    a    year. 

[230] 


These  societies  include  dairying,  the  making  of 
cheese,  the  sale  of  live  stock,  telephones  and  stores 
of  various  kinds.  The  citrous  fruit  growers  of  Cali- 
fornia do  an  annual  business  of  $54,000,000  a  year. 
The  farmers  of  Wisconsin  own  2,000  cooperative  so- 
cieties while  in  North  Dakota,  Nebraska,  Kansas 
and  all  over  the  West  the  cooperative  movement  is 
rapidly  superseding  capitalistic  control  of  staple 
farm  produce.  No  single  movement  has  grown  with 
such  rapidity  since  the  war  as  cooperation.  It  has 
swept  over  central  Europe  while  in  Great  Britain 
one  person  out  of  three  is  connected  with  one  or 
more  of  the  cooperative  societies  or  is  in  some  way 
benefitted  by  them. 

The  mind  of  man  would  change  in  a  free  society. 
Men  would  want  to  produce  to  capacity.  There 
would  be  no  reason  for  sabotage.  There  would  be 
no  strikes.  For  men  do  not  strike  against  them- 
selves. When  men  work  for  themselves  they  do  not 
need  a  trade  union.  Industrial  democracy  would 
keep  the  trade  union  as  a  fraternal  or  insurance 
agency  but  it  would  not  be  needed  as  an  agency  of 
protection.  Freedom  to  move  to  another  employ- 
ment is  the  only  protection  a  man  would  need. 
Even  the  unorganized  worker  would  be  in  a  posi- 
tion of  power. 

CONCLUSION 

It  may  seem  incredible  that  such  a  transformation 
would  follow  the  enactment  of  a  half  dozen  laws  or 

[231] 


that  a  revolution  in  all  the  relations  of  life  can 
be  ushered  in  without  the  striking  of  a  blow  or  the 
violent  overturn  of  the  government.  Yet  any  one 
who  will  honestly  follow  the  effect  of  the  proposals 
here  made  will  admit  their  revolutionary  conse- 
quences. The  appropriation  by  taxation  of  all  un- 
earned increment  which  inheres  in  land,  in  mines  and 
in  forests  would  open  up  the  continent  to  labor 
and  capital.  Hundreds  of  millions  of  acres  would 
call  for  workers,  for  farmers,  for  miners,  for  home 
builders.  The  burden  of  ground  rent  would  disap- 
pear and  such  rent  as  was  collected  would  be  turned 
into  the  public  treasury.  It  would  support  all  legiti- 
mate needs  of  the  state  and  relieve  us  of  all  other 
taxes.  With  banking  socialized  and  placed  under 
public  or  cooperative  control  credit  would  be  avail- 
able to  every  man  of  talent  who  had  character  and 
physical  strength  to  back  up  his  loan. 

Transportation  is  the  only  other  economic  agency 
necessary  to  free  men  in  their  economic  relations  and 
with  it  under  public  control  the  circulatory  system  of 
the  nation  would  be  opened  to  all  on  cheap  and  equal 
terms.  There  would  then  be  no  favored  shippers, 
no  rebates  or  discriminations.  When  to  these  are 
added  the  ending  of  patent  monopolies  and  franchise 
monopolies  and  the  opening  of  our  ports  to  the  trade 
of  the  world,  the  production  and  distribution  of 
wealth  will  automatically  settle  to  a  competitive  basis 
in  which  men  will  be  impelled  to  do  their  best.     Sab- 

[232] 


otage  will  come  to  an  end  with  freedom.  It  will  end 
in  no  other  way. 

With  privilege  ended  the  political  state  will  be- 
come a  less  imposing  thing  than  it  is.  It  will  be- 
come an  agency  of  democracy.  The  exploiting 
classes  will  lose  their  power  with  the  ending  of  the 
privileges  on  which  they  rely.  Just  as  the  old  aris- 
tocracy of  Europe  came  to  an  end  when  its  landed 
estates  were  distributed,  so  the  power  of  the  privi- 
leged groups  in  America  will  pass  away  when  their 
economic  privileges  are  taken  from  them. 

These  proposals  involve  no  impairment  of  prop- 
erty, no  confiscation  of  wealth.  They  recognize  the 
right  of  every  man  to  all  that  his  mind  or  his  hand 
produces.  They  guard  property  more  jealously 
than  does  the  state  under  which  we  live. 

Only  privileges  would  be  taken  away, —  the  spe- 
cial privileges  which  are  created  by  the  political 
state.  And  privilege  is  not  wealth.  It  is  not  the 
product  of  labor.  It  is  the  product  of  laws  enacted 
by  a  class  for  its  own  enrichment.  The  overhead 
charges  of  society  are  the  product  of  laws;  of  laws 
made  by  a  ruling  class.  And  these  privileges  are  in 
derogation  of  property.  They  are  responsible  for 
the  inequitable  distribution  of  wealth  and  the  pov- 
erty which  everywhere  persists  in  the  midst  of 
plenty. 

The  condition  of  America  and  the  world  as  well 
is  traceable  to  the  control  of  the  state  by  a  privilege 

[233] 


seeking  class.  The  privileges  which  it  enjoys  are  at 
war  with  social  justice  and  with  freedom  as  well. 
End  privilege  and  freedom  will  usher  in  a  new 
world  in  which  justice  and  equality  will  prevail. 
And  it  should  be  the  aim  of  society  to  adjust  its  in- 
stitutions to  the  laws  of  nature,  which  are  the  laws 
of  all  life. 


[234] 


INDEX 

Agriculture,  Early  Conditions  of,  13. 

America,  debtor  nation,  64;  present  condition  of,  147;  Constitution 

of,  102. 
Americanization,  76. 
Australia,  railroads  in,  213;  Commonwealth  Bank  of,  218. 

Banking,  and  Railroading,  25;  early-,  52;  New  York  banks,  54; 
banking  power  of  the  United  States,  58 ;  banking  power, 
France,  168;  cooperative  banking,  200;  banking  control  of  rail- 
roads, 216;  banking  public,  218;  North  Dakota  Bank,  218. 

Biological  state,  192. 

British  constitution,  99. 

Carthaginian  Wars,  Effect  of,  159. 

Caste,  Great  Britain,  164. 

Civilization,  history  of,  157. 

Civil  War,  73,  121. 

Class  control  of  politics,  117. 

Coal :  production  of,  7 ;  profits  in,  8 ;  monopolization  of  by  rail- 
roads, 27. 

Concentration  of  credit,  53. 

Constitution,  sacredness  of,  ni. 

Cooperative  Movement,  Russia,  190;  banking,  220;  industry,  231. 

Corporations,  profits  of,  134. 

Credit:  52;  early  banking,  52;  concentration  of,  53;  New  York 
Banks,  power  of,  54;  money  monopoly,  55;  speculation,  how 
promoted,  56;  credit  resources,  57;  control  of  industry,  61; 
financial  groups,   rise  to  power,   121;   social  nature  of,  217. 

Culture  feudalized,  150. 

Decay  of  the  State,  157. 

Discussion,  suppression  of,  87;  freedom  of,  156. 

Domestic  development  menaced  by  imperialism,  67. 

[235] 


Economic  Foundations  of  the  State,  ioi;  framework  of  feudal- 
ism, 144;  foundations  of  politics,  193. 
Education  in  the  United  States,  8i. 
Europe,  revolutionary,  325. 
Exploitation,  92,  95. 

Farmer,  Burdens  of,  139. 

Feudalism  in  America,  75;  what  it  is,  144;  industrial,  149;  politi- 
cal, 150. 

Financial  groups,  rise  to  power,  121. 

Food,  production  of,  13;  speculation  in,  15. 

France,  condition  of,  167. 

Freedom,  object  of  government,  114;  necessity  for,  179;  in  France 
and  England,  184;  principles  of,  196;  economic,  207;  philoso- 
phy of,  227,  236. 

Free  land,  202. 

French  Revolution,  146;  philosophers,  184. 

Fuel,  consumption  of  by  railroads,  35. 

Germany,  Transportation  in,  212. 

Government,  fear  of  by  early  settlers,  71. 

Great  Britain,  power  of  privileged  classes,  161;  land  monopoly  in, 

162;   high  finance,   165;   imperialism,  166. 
Ground  rent,  50,  137;  absorption  of  by  taxation,  204. 

High  Finance,  Great  Britain,  165. 
History  of  parties,  199. 
Hydro-electric  power,  34. 

Imperialism,  Financial,  63;  Great  Britain,  166;  ended  in  Russia, 

191- 
Industry,  conditions  of,  6 ;  control  of  by  credit,  61 ;  suppression  of, 

84;  feudalism  in,  149. 
Industrial  democracy,  207,  224. 
Iron  ore,  monopoly  of,  48. 

Lador,   Sabotage,   i  ;   conditions  of   2 ;   coal  miners,  days  work,   7 ; 

hostility  of  privilege  to,   77;   tax  burdens  of,  96;   burdens  on, 

140;   suppression  of,  153. 
Land:  policy  in  America,  42;  speculation,  43;  cit>'  land,  47;  ground 

rent,  50,  37,  204;  monopoly  in.  Great  Britain,  162;  free-,  202. 
Laissez  faire,  70. 


[236] 


Lauck,  W.  Jett,  134. 
Laws  of  Nature,  183. 
Legislation  and  exploitation,  93. 

Manly,  Basil  M.,  131. 
Marketing  in  Europe,  14. 
McAdoo,  W.  G.,  8. 
Mediocrity,  rise  of,  89. 
Milk  supply,  curtailing  of,  16. 
Miller,  Fred  J.,  5. 
Money  monopoly,  55. 

Monopoly:  promoted  by  railroads,  27;  land-,  44;  timber-,  49;  money, 
55;  Great  Britain,  162;  ending  of  by  taxation,  206. 

National  Development  and  Railroads,  26. 
Natural  government,  principles  of,  H2. 
Nature,  lavys  of,  183. 

Origin  of  State,  99. 

Overhead  charges  of  society,  127. 

Parties,  Economic  Agencies,  117;  history  of,  119. 

Plumb  Plan,  209. 

Polakov,  Walter  N.,  11,  37. 

Political  feudalism,  145,  150. 

Politics,  fundamentals  of,  125;  economic  foundations  of,  193. 

Political  liberty  in  America,  71. 

Population,  density  of  in  United  States,  46. 

Production,  wealth,  controlled  by  credit,  52. 

Press,  control  of,  80. 

Privilege,  rise  of,  73. 

Profits,  130;  of  steel  corporations,  132;  created  by  law,  142. 

Producing  classes,  burdens  on,  138. 

Public  schools,  83. 

Pujo  Investigating  Committee,  28. 

Railroads:  limit  production  of  coal,  9;  agriculture,  17;  sabotage, 
20;  importance  of,  22;  banking  control,  24,  216;  discrimina- 
tions, 26;  coal  monopolization,  27;  interlocking  interests,  29; 
supply  corporations,  30;  waste,  31;  water  transport,  33;  hydro- 
electric power,  34;  development,  37;  brotherhoods,  plan  of, 
209;  in  foreign  countries,  2ii. 

[237] 


Resources,  banking,  57.  .-       ^     , 

Revolutionary,  Europe,  225. 

Rome,  58. 

Russia,  ideals  of,  189. 

Sabotage,    i;   — in   food,    15;   by  railroads,  29;    of  initiative,  86; 

—  and  the  State,  98 ;  in  America,  171. 
Scarcity,  coal  production,  9. 
Schools,  public,  83. 
Sedition  laws,  98. 
Single  Tax,  203 ;  effect  of,  205. 
Slavery,  Rome,  160. 
Soviet,  what  it  is,  189. 

Speculation:  in  foods,  15;  in  land,  43;  promotion  of,  56. 
State,   The,   98 ;    economic  foundations   of,   loi ;   natural   state,   103, 

112;  sacredness  of  constitution,  in;  freedom,  proper  objective 

of,  114;  artificial,  186. 
Steel  corporations,  profits  of,  132. 

Tariff,  172. 

Taxes,  128. 

Teaching  profession,  82. 

Timber  monopoly,  49. 

Transportation,  importance  of,  22;    (see  Railroads). 

Waste,  Due  to  Private  Operation  of  Railroads,  31. 
Water  transport,  43. 

Wealth,  production  limited  by  railroads,  23 ;  production  controlled 
by  credit,  52. 


[238] 


UNIVERSITY  OF  CALIFORNIA  LIBRARY 

Los  Angeles 

This  book  is  DUE  on  the  last  date  stamped  below. 


KtC  D  LO-URfl 

OCT  21^9711) 

PEC'D  LD-M"!. 

NOV  1  1  1970 


^,     MAR  U  T2 


mARi 


Form  L9-Series  4939 


HC    106.       H839R 


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58  00207  4960 


UC  SOUTHERN  REGIONAL  LIBRARY  FACILITY 


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